Hong Kong housing woes spur HK$10 billion Shimao loan rollover
With no rebound in sight, lenders are forced to extend or amend developer loans to avoid booking losses
[HONG KONG] A HK$10 billion (S$1.6 billion) loan tied to a luxury Hong Kong apartment complex has turned into a months-long saga, underscoring the widespread impact of the city’s prolonged property slump.
United Overseas Bank (UOB) is extending the maturity of the loan, backed by the Beacon Peak complex near the Kowloon Tong area, after attempts to offload the facility to private credit investors fell through, according to sources familiar with the matter.
The project, developed by defaulted Chinese builder Shimao Group Holdings, only began selling in January, with just 17 of 332 units sold in its first phase of development as at Sep 2, according to sale records.
The Singapore-based lender had earlier reached out to private credit investors to sell the loan tied to the project, which is key to Shimao’s restructuring plans, Bloomberg News reported in January. Although investors such as Davidson Kempner Capital Management and Ares Management showed interest in buying the loan at a discount, UOB chose to roll over the facility by three years instead, said the sources, who asked not to be identified discussing private matters. The original borrowing was due to mature on Sep 30, they said.
A representative for Davidson Kempner declined to comment, while Ares, Shimao and UOB did not immediately respond to requests for comment.
Shimao’s loan extension is another case of banks kicking the can down the road as Hong Kong’s property slump drags on. With no rebound in sight, lenders are forced to extend or amend developer loans to avoid booking losses.
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Last month, Hong Kong builder Emperor International Holdings won banks’ support to extend about HK$16.5 billion in overdue loans, while distressed developer New World Development secured a record HK$88.2 billion borrowing in June, ending months of talks with lenders to refinance its debt.
UOB took over the loan from other banks in 2022, becoming a sole lender to Shimao’s facility with full claim over the underlying project, one of the offshore assets listed in the builder’s restructuring proposal.
The 17 Beacon Peak units were sold at prices ranging from HK$13.4 million to HK$37 million, according to Shimao’s records. The latest sale on Sep 2 was a 1,555-square feet unit that fetched a price of HK$32.3 million, the records showed.
Proceeds from the sale of units will be first used to pay back the loan’s principal, interest and accrued fees, as well as related fees tied to the project, Bloomberg News reported earlier. Its unsecured creditors, including bondholders, could get paid from the sale if there’s remaining cash. BLOOMBERG
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