Key Takeaways:
Shimao Group faces a Hong Kong winding-up petition over RMB2.5 billion in judgment debts, threatening to void share transfers made after Aug. 27.
Guotong Trust Co. filed a winding-up petition against Shimao Group Holdings over RMB2.5 billion in judgment debts, sending the developer's shares down about 9 percent and raising the risk that share transfers made after Aug. 27 will be void.
"The board is of the view that the petition does not represent the interests of other stakeholders of the company and may impair the value of the company," Shimao said in a filing to the Hong Kong Stock Exchange, adding it will "resolutely oppose" the petition and take all necessary legal actions.
The petition, dated Aug. 27, stems from four judgments issued by Mainland Chinese courts totaling RMB2,497,885,817, with the High Court scheduling the first hearing for Nov. 11. Under section 182 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, any transfer of the company's shares made on or after the presentation date would be void if the company is ultimately wound up, unless the court grants a validation order. Hong Kong Securities Clearing Company may also suspend CCASS services for the stock.
The filing deepens the distress across China's property sector, where developers have struggled to service debt since a 2021 credit crunch. Shimao Services Holdings, the group's property management arm, said the petition won't have a material impact on its financial performance or operations, though its shares still fell 3.8 percent.
Share transfers at risk
The board warned that any disposal of assets directly held by the listed entity and transfers of its shares after Aug. 27 could be void if the company is wound up, unless a validation order is obtained. Shimao said it will consider applying for such an order at a later stage, though the decision to seek and the granting of it are not guaranteed. HKSCC, which operates the city's central clearing system, retains the right to suspend services for the stock without notice, potentially returning share certificates not re-registered in the nominee's name.
Shimao Services sees no material hit
Shimao Services, which trades under 0873.HK, said the petition against its parent won't materially affect the group's financial performance or operations, and it will monitor the proceedings closely. The property management arm's shares fell 3.8 percent, while analysts rate the stock a Sell with a HK$0.60 price target. Shimao Group, with a market value of about HK$705.5 million, carries a Hold rating with a HK$0.40 target.
The petition adds to the pressure on Chinese developers, many of which have faced winding-up applications from creditors as they restructure offshore debt. Shimao's board comprises two executive directors, one non-executive director and three independent non-executive directors. The company said it will update shareholders on significant developments, but the outcome remains uncertain.
This article is for informational purposes only and does not constitute investment advice.
