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Shimao Group Faces Liquidation Over Unpaid USD 202M Loan 


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Shimao Group faces liquidation petition by China Construction Bank (Asia) in Hong Kong over HKD1.58 Billion (USD 201.75 million) debt. 
Image Source: Reuters 

Chinese property giant, Shimao Group, finds itself embroiled in a legal dispute as China Construction Bank (Asia) has initiated a liquidation petition against the company in Hong Kong, citing a debt of HKD1,579.5 million (USD 201.75 million). This action marks a departure from the usual course, with a state-owned bank taking legal measures offshore against a mainland developer. 

In response to this development, Shimao Group’s shares experienced a significant drop of 8.8% in early trading. Nevertheless, the company has affirmed its determination to oppose the lawsuit “vigorously”. It intends to proceed with its proposed plan to restructure approximately USD 11.7 billion of offshore debt, aiming to achieve a reduction of 60%. 

Despite the petition filed to the Hong Kong High Court, Shimao Group maintains its stance that it does not represent the collective interests of the company’s offshore creditors and other stakeholders. In the filing, “The company is of the view that the Petition does not represent collective interests of the company’s offshore creditors and other stakeholders”.  

The ongoing turmoil within China’s property sector stems from a regulatory crackdown on high leverage among developers, which has triggered a liquidity crunch. Shanghai-based Shimao Group now finds itself among the many Chinese developers grappling with financial challenges after defaulting on its offshore bonds. 

A significant number of bondholders have already voiced their opposition to Shimao’s restructuring plans. They cite concerns regarding potential losses and the absence of upfront payments. This dissent complicates the company’s efforts to navigate through its financial difficulties. 

Amidst the tumult, Deutsche Bank is reportedly considering a similar course of action against Shimao Group. If pursued, this move would further underscore the persistent challenges within China’s property market, despite a moderated decline in 2024 compared to the preceding year. 

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