Updated March 1st, 2024 at 12:42 IST

China property crisis: Deutsche Bank to slap liquidation suit against developer Shimao

Shimao Group, among the many Chinese developers with rising credit defaults, missed interest and principal payment for a $1 billion offshore bond in July 2022.

Reported by: Business Desk
Deutsche Bank Shimao liquidation lawsuit | Image:Republic
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Deutsche Bank Shimao liquidation lawsuit: Deutsche Bank is gearing up to file a liquidation lawsuit against Shanghai-based developer Shimao Group in Hong Kong amid a deepening property sector crisis, news agency Reuters reported, quoting sources familiar with the matter.

Shimao Group, one of the numerous Chinese developers grappling with rising credit defaults, notably missed the interest and principal payment for a $1 billion offshore bond in July 2022. Consequently, the entirety of its $11.7 billion offshore debt has been classified as in default.

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Deutsche Bank, a creditor of Shimao, is unsatisfied with the developer's debt restructuring terms and is therefore contemplating initiating the liquidation lawsuit this month, as per the report. The German bank's exposure to Shimao is primarily associated with private dollar bonds, although the exact extent of this exposure remains undisclosed.

This move by Deutsche Bank, if finalised, would mark a rare instance of a foreign financial institution initiating a liquidation lawsuit against a Chinese developer amid the ongoing crisis in the sector. Notably, China Evergrande Group, the world's most indebted property developer, faced a similar fate when it was ordered to be liquidated by a Hong Kong court in January.

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The surge in liquidation petitions against Chinese developers comes at a time when Beijing is striving to rejuvenate the property sector through various support measures. However, the mounting challenges faced by these developers, coupled with the increasing number of liquidation petitions, continue to raise concerns among homebuyers regarding the outlook for real estate firms.

Amidst these developments, Shimao Group has been engaged in negotiations with creditors to restructure its $11.7 billion offshore debt. While the developer presented a debt revamp plan aimed at reducing its offshore debt by up to $7 billion, creditors remain hesitant to accept the proposed terms, particularly the significant haircut to their investments.

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(With Reuters inputs.)

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Published March 1st, 2024 at 12:42 IST