UOB has sued China’s Shimao Group and four of its subsidiaries, accusing the developer of breaching terms of certain loan and security agreements. The Singaporean bank and other lenders had granted HKD 10bn ($1.3bn) of loan facilities to one of Shimao’s units, Adventure Success Ltd, where the terms of the loan required that another subsidiary, Genuine Victory Holding had a 100% holding in it. According to the writ from the Hong Kong high court, Shimao’s units then allegedly re-allocated funds from the loan facility and allotted shares between its entities without seeking permission from UOB. This ultimately led to “Genuine Victory’s holding in Adventure Success to be diluted to 5.4% from 100%”. Bloomberg notes that this episode adds to a growing impatience among investors regarding China’s property debt crisis. The filing adds to Shimao’s growing troubles, which include the default on one of its dollar bonds earlier this month.
Shimao’s dollar bonds are all trading at distressed levels, hovering between ~7.5-9.5 cents to the dollar.