Shimao, once hailed as one of China’s stronger developers, sued by UOB over terms of US$1.3 billion loan

Shimao purportedly re-allocated loans and allotted shares between entities without the Singapore bank’s consent, UOB said in its July 12 writ in Hong Kong

The accusations involve a 2017 agreement for UOB and other lenders to grant loan facilities of up to HK$10 billion (US$1.3 billion) to Shimao’s entity Adventure Success

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Published: 3:54pm, 28 Jul 2022

Distressed Chinese developer Shimao Group Holdings and four units have been sued by United Overseas Bank in Hong Kong, adding to broader signs of growing investor impatience amid the nation’s worsening property debt crisis.

UOB alleged that Shimao and the group entities breached terms of certain loan and security agreements, by purportedly re-allocating loans and allotting shares between the entities without the Singapore bank’s consent, according to a writ in the High Court of Hong Kong dated July 12.

The accusations involve the terms of an agreement from 2017 for UOB and other lenders to grant loan facilities of up to HK$10 billion (US$1.3 billion) to group entity Adventure Success. The terms were meant to secure the obligations of the unit, which holds a private residential land development project in Hong Kong’s Kowloon area.

Luxury builder Shimao, which ranked as China’s 22nd biggest by sales in the first half of this year, was once considered one of the country’s stronger developers. But it’s been trading at deeply distressed levels in the dollar bond market for months now. The company also suffered its first-ever default on a public note earlier this month, when it missed payment on a US$1 billion security.

Shimao is among a growing number of real estate firms whose troubles have been mounting from last year, amid a sector-wide liquidity crunch sparked by a government crackdown on excessive borrowing and housing speculation that’s sent defaults to a record.