UOB to repurchase loan for Shimao Kowloon project

Shimao chairman Xu Rongmao struggles to repay debts

After suing ailing mainland builder Shimao Group Holdings in July over unpaid debt related to a residential project in Hong Kong, Singapore’s United Overseas Bank Ltd (UOB) is considering buying out all rights to the troubled loan, local media announced on Wednesday.

After teaming up with Bank of China Communications, Industrial and Commercial Bank of China, HSBC and Hang Seng Bank in 2017 to lend Shimao HK$10 billion ($1.27 billion) for the development of a Tai Wo Ping luxury housing project on Hong Kong’s Kowloon Peninsula, UOB is now considering taking over stakes provided by its partners, according to a report by the Hong Kong Economic Journal.

UOB now says it has resolved its dispute with Shimao, with its potential takeover of the loan allowing it to take full or partial ownership of the project at 9 Yin Ping Road, a secluded location near a network of hiking trails. .

“We can confirm that we have settled with Shimao out of court,” a Shimao spokesperson said in an email response to Mingtiandi.

Award-winning project

According to a writ filed in the High Court of Hong Kong dated July 12, the loan to Shimao was secured by an equity charge – a kind of pledge – for the 100% stake of Genuine Victory Holding, a subsidiary of Shimao, in Adventure Success.

9 Yin Ping Road

9 Yin Ping Road is located in one of the greenest areas of Kowloon

Adventure Success is a wholly owned subsidiary of Shimao which owns and controls the development of the Tai Wo Ping project. The development is valued at around HK$20 billion and Shimao succeeded in December in extending the maturity of the loan from May this year to July 2023, according to the Hong Kong Economic Journal.

UOB alleged that Shimao’s reallocation of intercompany loans, as well as the allocation of shares, to two other Shimao subsidiaries in May led to Genuine Victory’s stake in Adventure Success being reduced to approximately 5.4% against 100%. The bank requested that the reassignment and allotment of the shares be reversed, among other claims.

Shimao outbid developers including Wheelock Properties, China Overseas and Cheung Kong Property Holdings Limited (now CK Asset Holdings Limited) to acquire Lot No. 6542 at Yin Ping Road for its Tai Wo Ping luxury housing project for 7, HK$02 billion in September 2015, according to a statement from the Hong Kong Land Department.

A plan approved by the Hong Kong Building Department in 2017 showed the developer planned to construct six 18-storey residential buildings and 29 four-storey houses on the site, providing around 1,000 units covering a gross floor area of 631,900 square feet (58,705 square meters).

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The project is being developed in two phases, with the first phase delivering around 330 units receiving approval for presale in January. Construction of the project is expected to be completed in December 2023.

Local media reported in February that Shimao Group was looking to sell a partial stake in the project, but no deal has yet been announced.

Fallen Angel

Shimao, whose flagship projects included five-star hotels in Shanghai, was once seen as largely immune to the crisis that has engulfed bigger peers like China Evergrande Group and Sunac China Holdings. However, its offshore bonds have been trading at troubled levels for months and the company suffered its first-ever default on a public note in July when it missed a $1 billion security payment.

To stay solvent, the cash-strapped developer scrambled to raise cash by divesting assets.

In December, Shimao agreed to sell its 22.5% stake in the Grand Victoria project in West Kowloon, Hong Kong, to its joint venture partners in the luxury residential development for HK$2.08 billion, recording a loss. of HK$770 million.

In January, Shimao agreed to sell the Hyatt on the Bund Hotel in Shanghai to a real estate investment company controlled by the city government for 4.5 billion RMB ($707.5 million).

Earlier this month, Shimao agreed to sell its stakes in two Beijing residential projects to blue-chip developer China Resources Land for 3.3 billion RMB ($480 million).

Last month, the developer offered a two-class restructuring plan to offshore creditors to repay $11.8 billion over three to eight years, according to a Reuters report. He said he would retain the right to dispose of the Tai Wo Ping project and a hotel in Hong Kong’s Tung Chung area, with proceeds to be used to repay debt.

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