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Singapore property dynasty sees woes piling in China unit

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Chongqing Sincere Yuanchuang Industrial Co. said its parent City Developments delayed decision making, stalling opportunities to raise funds and improve cash flow. (PHOTO: Chongqing Sincere)
Chongqing Sincere Yuanchuang Industrial Co, owned by City Developments, may undergo a court-led restructuring after a bankruptcy application was filed against it. (PHOTO: Chongqing Sincere)

By Bloomberg News

(Bloomberg) — Singapore’s richest property dynasty pledged to continue to limit its exposure to its cash-strapped China unit, which is now facing a bankruptcy claim.

City Developments Ltd. said it has “ring-fenced its current financial exposure to its investment” in Chongqing Sincere Yuanchuang Industrial Co. and “will not support” the continuing obligations of the Chinese developer.

“Despite the bankruptcy proceedings, the group will continue to strenuously protect its position and limit further exposure,” CDL said in a statement filed to the Singapore Exchange on Thursday. The company’s shares fell as much as 4.3% in Singapore trading.

Bloomberg earlier reported that Sincere may undergo a court-led restructuring after a bankruptcy application was made against it by a Beijing-based creditor. Beijing Yi He Mercury Investment Co. filed the petition to the No. 5 Intermediate People’s Court in Chongqing on July 5, according to the National Enterprise Bankruptcy Information Disclosure Platform.

If the local court accepts the application, a formal process would be triggered leading to either restructuring or liquidation, or a settlement between creditors and the company.

Sincere Property Holdings, the second-largest shareholder of Chongqing Sincere, is preparing to work with stakeholders and creditors on a restructuring of the builder, people familiar with the matter told Bloomberg earlier, asking not to be identified discussing private information. CDL, owned by the billionaire Kwek family, has a 51% stake in the developer.

The case is still at an application stage, Chongqing Sincere said in a written reply to Bloomberg, adding it doesn’t affect business in its subsidiary property projects. Sincere Property Holdings said it respects credit holders’ wishes and its other businesses remain normal.

A restructuring would close a painful chapter for CDL, which posted a record annual loss last year after writing off almost all of its S$1.9 billion investment in Chongqing Sincere. CDL Chief Executive Officer Sherman Kwek once hailed the 2020 deal as “game-changing” before vowing not to inject further funds until the unit returned to health.

As the “bleeding” in Sincere may stop soon, investors may see long term value in CDL, said Justin Tang, the head of Asian research at United First Partners in Singapore. “The restructuring is a right step toward a resolution of this, be it via liquidation or sharing the pain among the company and creditors.”

Chongqing Sincere missed payment on a local bond that matured in March, and blamed CDL’s delayed decision making for hurting its ability to improve cash flow. The Chinese firm had no concrete plans to raise funds for outstanding principal, Zhao Dongmei, chief financial officer of shareholder Sincere Property Holdings said in a March interview. It has missed subsequent onshore bond payments.

In a business update in May, CDL said Sincere still faces liquidity challenges and is working to speed up collections, asset sales and divestments to raise funds. Much work is ongoing amid China’s measures to cool the real estate sector, the Singapore firm said.

More on Sincere:

Chinese firm’s bond lapse exposes rift with Singapore parent

Scion of Singapore’s Richest Clan Strives to Salvage China Deal

© 2021 Bloomberg L.P.

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