Biguoyuan Defaults on HKD 1.6 Billion Loan
Creditors File Liquidation Petition in Hong Kong Court
The "debt bomb" is swelling in the Chinese real estate market. As creditors accelerate liquidation pressure on Country Garden (Biguiyuan), a Chinese real estate developer that has defaulted on its debts, the loan amounts for distressed real estate companies are rapidly increasing, supported by government encouragement.
According to Chinese economic media Caixin on the 28th, Ever Credit, a creditor of Biguiyuan, filed a liquidation claim lawsuit against Biguiyuan at the Hong Kong High Court the day before. This was because Biguiyuan failed to repay interest related to a loan of 1.6 billion Hong Kong dollars. The court set the first hearing date for May 17.
Ever Credit is a subsidiary fully funded by Kingboard Group, which is a company manufacturing and selling copper-clad panels. According to Kingboard Group's announcement in August last year, the company signed a loan contract worth 1.88 billion Hong Kong dollars (approximately 320.9 billion KRW) with Biguiyuan in December 2021, and both parties agreed to repay the loan in installments.
On the 28th, Biguiyuan issued a statement saying, "Filing a liquidation claim lawsuit does not mean the petitioner can liquidate the company," and added, "It will not have a significant impact on the company’s organizational restructuring, debt restructuring, or various schedules." They also explained, "Company liquidation would be detrimental to all parties involved," and "The company will seek legal advice and take necessary measures to protect its legal rights."
In this situation, loans from commercial banks to real estate companies have surged this month. According to Chinese media such as 21st Century Business Herald, as of the 20th of this month, a total of 5,349 projects were included in the real estate loan support "whitelist," and among them, 162 projects received loans totaling 29.43 billion yuan. This is an increase of 11.3 billion yuan compared to the tally on the 4th of this month, before the Lunar New Year holiday (January 10?17).
21st Century Business Herald reported that the whitelist projects continue to increase, and companies previously identified as "real estate risk" firms such as Biguiyuan, Longfor (Sunac China), SmaO, Greenland (Ludi), and CIFI (Xuhui) have succeeded in including dozens of projects in the whitelist. Banks explained that they also reviewed and selected projects that had experienced defaults.
Longfor, a large real estate company suffering from liquidity shortages, submitted more than 90 projects to the whitelist. Greenland (Ludi) and Central China (Jianye) included more than 40 projects, and Biguiyuan and CIFI (Xuhui) included more than 20 projects each in the whitelist. The total number of distressed real estate company projects included in the whitelist exceeds 400.
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