Crisis in Chinese Real Estate... Smartech Requests Liquidation from Chinese State-Owned Bank

270 Billion Won Loan Unpaid... Foreign Media Calls It a "Rare Case"

China's major real estate developer, Simao Group, has been petitioned for liquidation by a Chinese state-owned bank.

According to Bloomberg and other sources on the 8th, Simao Group announced that China Construction Bank (Asia) filed a liquidation petition with the Hong Kong High Court on the same day. This was due to Simao Group's failure to repay a loan amounting to HKD 1.58 billion (approximately KRW 273.2 billion).

[Image source=Reuters Yonhap News]

Major foreign media outlets such as The Wall Street Journal (WSJ) evaluated that it is rare for a Chinese state-owned bank to file a liquidation petition against a domestic developer.

Simao Group strongly opposes the liquidation petition and stated that it will continue to pursue the plan proposed last month to restructure its offshore debt.

Simao Group, headquartered in Shanghai and ranked among the top 20 real estate developers in China, defaulted in July 2022 on principal and interest payments for offshore bonds worth USD 1 billion (approximately KRW 1.354 trillion). Subsequently, the entire offshore debt of USD 11.7 billion (approximately KRW 15.8418 trillion) was considered in default, leading Simao and its creditors to begin negotiations on offshore debt restructuring. At the end of last month, Simao proposed debt restructuring terms, but the creditors expressed opposition.

Earlier last month, there were reports that Deutsche Bank was planning to file a lawsuit related to Simao Group's liquidation with the Hong Kong court.

Jeff Zhang, a Morningstar analyst, said, "Creditors may use the liquidation petition as leverage to push forward the restructuring."

Simao's stock price has fallen about 40% this year due to continuous losses, debt concerns, and the downturn in China's real estate market.

The prolonged downturn in the real estate sector, which once led China's economic growth, continues. Evergrande received a liquidation order from the Hong Kong court in January. Country Garden, once China's largest real estate developer, will enter liquidation hearing procedures at the Hong Kong court next month.