Cash-strapped developer China Aoyuan Group tumbled to its lowest level in almost six years after it was summoned by the Higher Court of Hong Kong for guaranteeing US$131 million in debt for a subsidiary. Shares of the Chinese developer slumped by 9.7 per cent to HK$1.49 at the close in Hong Kong. That put the stock at its lowest close since February 2016, and has taken its annual decline to 80 per cent. The sell-off in China Aoyuan, which is among a raft of mainland Chinese developers that have missed interest payments on offshore debt, resumed after the company said in an exchange filing that it had received a writ of summons issued on December 23, in which Citibank and Nine Masts Investment Fund sought the repayment of debt and interest owed by Happy Team Investments, a wholly-owned unit of the developer. Property stocks jump on China rate-cut bets as Swiss fund sees systemic risk “The board has been actively seeking advice from its financial and legal advisers,” China Aoyuan said in a statement. “The company may consider communicating with the plaintiffs to seek to resolve the claim and/or any consequential issues arising from the claim consensually and amicably and within a reasonable time frame.” The matter will not have a material impact on China Aoyuan’s business operations and financial conditions, according to the statement. Hong Kong firms target stricken Chinese developers to acquire cheap assets The developer, however, failed to soothe investors’ concerns about the industry-wide financial health of China’s property sector. The property market, which accounts for about a third of China’s economy directly and indirectly, is reeling from a liquidity squeeze and sluggish home sales, as banks tighten funding after the debt crisis of China Evergrande Group was brought to light. Major Chinese developers trading in Hong Kong and the mainland have had about US$92 billion in market values wiped out this year. Brokerages from Citic Securities to Shenwan Hongyuan have forecast that the fallout of this liquidity crunch will probably continue into early next year. It will drag down new housing starts and property investment even after the central bank loosened policies this month. China Aoyuan, whose credit rating was downgraded by Standard & Poor’s and Moody’s, has failed to meet creditors’ demands for the repayment of US$651 million in debt. The Guangzhou-based developer also has two big deadlines looming – a US$188 million maturity on a 4.2 per cent dollar bond due on January 20, and three days later a US$400 million maturity on an 8.5 per cent dollar bond. Indebted Chinese developers strike deals with investors, but not out of woods yet “The company is working diligently with its advisers to communicate with relevant creditors of the group and to seek to implement as soon as practicable a remediation plan that treats creditors fairly and protects the interests of the group’s creditors and other stakeholders,” it said in the statement.