The media, citing insiders, reported that Deutsche Bank is preparing a liquidation lawsuit against the Chinese developer Shimao Group.
The mentioned decision by one of the largest financial institutions in Europe is a rare step for a foreign organization against the background of rising debt on loans and the deterioration of the situation in the Chinese real estate sector, which already corresponds to parameters indicating a crisis.
Shimao is based in Shanghai. This company has already defaulted on offshore bonds after interest and principal on the mentioned bonds, amounting to $1 billion, were not paid in July 2022. After this missed payment, the developer’s entire $11.7 billion offshore debt is in default.
Deutsche Bank is one of Shimao’s creditors. The media, citing insiders, report that the financial institution filed a liquidation lawsuit after concluding that the terms of the restructuring of the developer’s debt were unacceptable.
Deutsche Bank did not provide any comments on the information about the mentioned intentions. Representatives of Shimano also did not respond to a media request regarding the prospects for the implementation of the liquidation decision.
The developer, whose immediate future is not associated with positive forecasts, was in the top 20 construction firms in China during the best period of its history. However, periods of prosperity are very often followed by difficult times of decline. This pattern reflects to some extent the harsh laws of being, which are not always favorable to persons and their aspirations.
Shimao presented to creditors the terms of offshore debt restructuring in December 2023. Up to this point, negotiations were conducted, which lasted 18 months.
One insider reported that Deutsche Bank’s credit risk concerning Shimao is related to private dollar bonds. Currently, there is no information about the scope of the specified risk.
If the bank’s intention is fully realized, it will be a rare example of how a large foreign financial firm initiates the process of liquidation of a Chinese developer.
In January this year, the Hong Kong court decided to liquidate the China Evergrande Group. This developer had a huge debt. The court decided after a local creditor filed a lawsuit against the specified company that defaulted. Deutsche Bank also plans to file a lawsuit in Hong Kong.
Moreover, a liquidation petition was filed this week against another Chinese developer, Country Garden. This company, registered in Hong Kong, has not fulfilled its obligations to repay the debt.
Chinese developers are increasingly facing the threat of liquidation at a time when Beijing is taking measures aimed at overcoming the crisis in the real estate sector. At the same time, the situation of developers is likely to be a negative impact factor on the mentioned efforts of the authorities of the Asian country.
The real estate sector is one of the main fundamental constituents of the Chinese economic system. In 2021, the sector faced a liquidity crisis, the scale and depth of which proved catastrophic. This reality in the sphere of real estate was formed after Beijing decided to stop the debt-fuelled construction boom. Against the background of these measures by the Chinese authorities, sales fell and prices for new housing rose. Since then, the list of private developers who failed to fulfill offshore debt repayment obligations has been gradually increasing. From the beginning of the crisis, at least 10 companies have made painful decisions to liquidate.
