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China Yuanbang: 172.1m yuan loaned to 2 China firms to take part in property projects

CHINA Yuanbang Property Holdings said it had loaned a combined 172.1 million yuan (S$33.3 million) to two companies at 16 per cent per annum interest in order to eventually participate in their property development projects.

It had loaned 148.6 million yuan to Guangzhou Jiadi Xindu Development Co - an independent third party, and 23.5 million yuan to Kaiping Qingshi Auto Parts Co - which is 30.6 per cent owned by China Yuanbang's executive director Zhou Jiangtao, the company said in response to queries from the Singapore Exchange (SGX).

China Yuanbang's directors said the loan to Jiadi Xindu was within the group’s ordinary course of business and does not require shareholders’ approval. As the interested person transaction did not cross the threshold limits under Chapter 9 of the SGX's listing manual, no shareholder approval was obtained for the Kaiping Qingshi loan.

In its financial results for the year ended June 30, 2019, the company said the Jiadi Xindu loan was to secure rights to participate in the developer's Zhongshan Guangdong property projects and tourist projects in three Chinese provinces.

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The Kaping Qingshi loan was to fund the initial redevelopment of the firm's land parcel in Kaiping City. China Yuanbang said it would eventually participate in the redevelopment of the project.

Kaiping Qingshi had in 2016 applied to the Guangdong government to convert its industrial land to residential use as it had ceased its car parts business.

Bidding for land parcels directly in a Chinese government auction requires large upfront funds, therefore China Yuanbang cooperates with other property developers to relieve funding costs and acquire land at a lower cost, the company said.

The watch-listed company said its management had assessed the borrowers and performed due diligence on their property projects before agreeing to the loans.

The loans were secured by the borrowers' proceeds from presales of their property development projects and no repayment issues were expected, said China Yuanbang.

Gross proceeds from Jiadi Xindu's Guangzhou City property sales was about 700 million yuan, and the company had repaid the loan on schedule. The loan was in three tranches, each to be paid back over a period of two years from 2018 to 2020.

Gross proceeds from Kaiping Qingshi's Kaiping City property sales was about 300 million yuan, but the loan is overdue and renewal negotiations are ongoing. The loan, in one tranche, was to be repaid over one and a half years.