Several creditors sue China's state-owned shareholder in HK
ECONOMY & POLICY

Several creditors sue China's state-owned shareholder in HK

Creditors have initiated legal action in Hong Kong against the largest state-owned shareholder of China South City, aiming to recover $1.4 billion owed to them, according to court documents and a source familiar with the situation. This lawsuit marks the first instance of such action against a Chinese state shareholder of a developer seeking payment under the keepwell provision since the property sector encountered a debt crisis in 2021.

The keepwell provision, although not a direct guarantee, serves as a credit enhancement tool frequently utilised by Chinese companies in recent years for the issuance of offshore bonds, as noted by legal experts.

This lawsuit is part of a growing trend of legal challenges filed against defaulted Chinese developers in Hong Kong, as international creditors seek to recoup their investments amidst the unprecedented debt crisis in China's property market.

In response to the lawsuit against China South City, summonses have been issued against Shenzhen SEZ Construction and Development Group Co. Ltd (SZCDG), the state-owned shareholder of the developer, according to a filing dated June 3 submitted to the Hong Kong High Court. The creditors' consortium, represented by Citicorp and law firm Mayer Brown, is seeking damages of at least $1.4 billion, leveraging the keepwell provision as outlined in the filing.

Notably, SZCDG allegedly entered into a keepwell deed with creditors on August 9, 2022, to aid China South City in meeting its repayment obligations under a series of senior bonds. However, the developer missed a principal payment of $11.25 million on a dollar bond due on February 9, 2024, followed by defaults on payments related to two other tranches of notes in April, as revealed in the filing. The state shareholder is accused of failing to fulfil its obligations in providing credit support.

Consequently, the group of creditors is pushing for SZCDG to repay the outstanding principal amounts, accrued interest, and associated fees, as detailed in the filing.

SZCDG holds a 29% stake in China South City, according to the developer's 2023 annual report. Specialising in the construction and operation of infrastructure and industrial parks, SZCDG is owned by the Shenzhen government, according to its official website.

Earlier this year, a consortium of bondholders had proposed utilising the Hong Kong law-governed keepwell deed to pursue legal action against the state shareholder for outstanding dues, as reported by the source in February. (Source: Reuters & ET)

Creditors have initiated legal action in Hong Kong against the largest state-owned shareholder of China South City, aiming to recover $1.4 billion owed to them, according to court documents and a source familiar with the situation. This lawsuit marks the first instance of such action against a Chinese state shareholder of a developer seeking payment under the keepwell provision since the property sector encountered a debt crisis in 2021. The keepwell provision, although not a direct guarantee, serves as a credit enhancement tool frequently utilised by Chinese companies in recent years for the issuance of offshore bonds, as noted by legal experts. This lawsuit is part of a growing trend of legal challenges filed against defaulted Chinese developers in Hong Kong, as international creditors seek to recoup their investments amidst the unprecedented debt crisis in China's property market. In response to the lawsuit against China South City, summonses have been issued against Shenzhen SEZ Construction and Development Group Co. Ltd (SZCDG), the state-owned shareholder of the developer, according to a filing dated June 3 submitted to the Hong Kong High Court. The creditors' consortium, represented by Citicorp and law firm Mayer Brown, is seeking damages of at least $1.4 billion, leveraging the keepwell provision as outlined in the filing. Notably, SZCDG allegedly entered into a keepwell deed with creditors on August 9, 2022, to aid China South City in meeting its repayment obligations under a series of senior bonds. However, the developer missed a principal payment of $11.25 million on a dollar bond due on February 9, 2024, followed by defaults on payments related to two other tranches of notes in April, as revealed in the filing. The state shareholder is accused of failing to fulfil its obligations in providing credit support. Consequently, the group of creditors is pushing for SZCDG to repay the outstanding principal amounts, accrued interest, and associated fees, as detailed in the filing. SZCDG holds a 29% stake in China South City, according to the developer's 2023 annual report. Specialising in the construction and operation of infrastructure and industrial parks, SZCDG is owned by the Shenzhen government, according to its official website. Earlier this year, a consortium of bondholders had proposed utilising the Hong Kong law-governed keepwell deed to pursue legal action against the state shareholder for outstanding dues, as reported by the source in February. (Source: Reuters & ET)

Next Story
Real Estate

Birla Estates Tops Global GRESB 2025 Rankings

Birla Estates (BEPL), a wholly owned subsidiary of Aditya Birla Real Estate (formerly Century Textiles and Industries Limited), has been recognised as a Sector Leader in the 2025 GRESB Real Estate Assessment, securing top honours across multiple global and regional categories.Birla Estates’ Achievements in GRESB 2025:Global Sector Leader – ResidentialGlobal Sector Leader – Non-Listed ResidentialRegional Sector Leader – Asia – ResidentialRegional Sector Leader – Non-Listed – Asia – ResidentialThese distinctions reaffirm Birla Estates’ exceptional performance in Environmental, ..

Next Story
Infrastructure Transport

Progota India Secures RDSO Clearance for Kavach 4.0

Concord Control Systems, one of India’s leading manufacturers of embedded electronic and critical system solutions, announced that its associate company, Progota India, has received Technical Prototype Clearance from the Research Designs and Standards Organisation (RDSO) for Kavach 4.0, the latest version of Indian Railways’ indigenous Automatic Train Protection (ATP) system.With this clearance, Progota has been formally approved to execute its ongoing trial order from South Central Railway, marking a key milestone in India’s railway modernization journey. The approval also establishes P..

Next Story
Infrastructure Urban

MPS Interactive Systems Completes Full Acquisition of Liberate Group

MPS Interactive Systems (MPSi), a material subsidiary of MPS, has completed the acquisition of the remaining shareholding in the Liberate Group of Companies—comprising Liberate Learning, App-eLearn, and Liberate eLearning.With this transaction, MPSi now holds 100 per cent ownership of all entities within the Liberate Group, making them its wholly owned subsidiaries. The acquisition was executed in line with the valuation methodology defined in the original transaction documents.Commenting on the development, Rahul Arora, Chairman and CEO of MPS, said, “The corporate learning sector continu..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?