Heavy losses prompted a major Singaporean real estate group to sell its stake in a Chinese company, for one dollar, while it had paid about 1.4 billion dollars a few months ago to obtain this share.
City Developments Limited plans to sell its stake in troubled Chinese developer Chong Ching Sensory for $1 to an unrelated company, Sure Spread Limited, which was incorporated in the Seychelles.
The Singaporean company said in a statement, according to the US Bloomberg Agency, on Saturday, that the deal takes into account “existing liquidity issues and the restructuring of Sensory due to potential bankruptcy.”
City Developments Limited had acquired a majority stake in Sensory last April, but the repercussions of the Corona virus pandemic and the Chinese “red lines” policy that imposes restrictions on the movement of foreign funds recently, increased liquidity restrictions in the Chinese company, which led to massive losses for the Singaporean shareholder.
Because of the Chinese company’s faltering, Singapore’s City Developments Limited, led by CEO Sherman Kwik, wrote off nearly 1.9 billion Singapore dollars ($1.4 billion) in the value of its investments in Sensory.
The Singaporean company said the exit “allows it to avoid engaging in a protracted bankruptcy reorganization for the troubled Chinese company”. All appointed directors and officers of City Developments will resign from Sensory and its associated companies following the exit or divestiture.
The Singaporean company owns a 63.75% stake in HCP Chong Ching Property, which in turn owns 80.01% of the troubled Sensory.
China imposes restrictions on the flow of foreign funds to Chinese companies whose units are being set up abroad, especially in vital sectors such as technology.
A week ago, Bloomberg quoted informed sources as saying that the National Development and Reform Commission in Shanghai had rejected recent applications by startup companies, with the aim of obtaining permission to inject foreign funds into subsidiaries established in places such as the Cayman Islands. China’s recent crackdown on a large number of technology companies has alarmed investors globally.
