Shimao’s lender UOB seeks private credit deal on HK$10 billion loan

A SHIMAO Group Holdings lender is in talks with private credit investors in hopes of offloading a HK$10 billion (S$1.7 billion) loan due this year tied to a luxury apartment complex that’s key to a restructuring at the defaulted Chinese developer, according to sources familiar with the matter.

Singapore-based United Overseas Bank (UOB) has reached out to such investors in recent weeks for a deal regarding the loan, they said. The loan, taken out by Shimao in 2022, matures on Sep 30 and is backed by the Beacon Peak complex, located in Hong Kong’s Kowloon Tong neighbourhood.

The builder, which is looking to unload assets to pay back creditors, put 13 units of the complex up for sale this month, according to sales documents. It has sold three of them as at Jan 18 at prices ranging from HK$28 million to HK$37 million, records showed.

That’s still far short of the loan principal, and the sales pace underscores Shimao’s challenges in trying to raise cash quickly in Hong Kong’s weak and discounted property market. Private credit investors’ involvement could further complicate an ongoing debt restructuring process – in which Beacon Peak is a piece eyed by creditors – as their business model often operates on seizing borrowers’ assets when they default.

“Shimao may struggle to achieve a high sell-through rate at its new Beacon Peak project in Kowloon, given its distance from transport links,” Bloomberg Intelligence analysts Kristy Hung and Monica Si wrote in a note.

Shimao did not immediately reply to a request for comment. UOB did not respond to e-mails seeking comment and phone calls were not answered.

Proceeds from selling the units will be first used to pay back the loan’s principal, interest and accrued fees, as well as related fees for the project, according to sources familiar with the arrangements.

The complex could generate around HK$12 billion to HK$13 billion based on an average price of HK$22,000 per square foot, according to estimates by Bloomberg Intelligence.

“Of the first phase’s 332 units, 64 per cent are 1,198 to 3,165 sq ft in size, targeting luxury buyers, suggesting risk of a slow sell-through,” Hung and Si wrote.

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The apartment complex is one of the offshore assets Shimao listed in its restructuring proposal, according to a company filing.

Its unsecured creditors, including bondholders, could get paid from the sale if there’s remaining cash, the sources said.

Shimao built the complex after it was awarded the site by the Hong Kong government in 2015 for HK$7 billion.

Meanwhile, Shimao plans to hold a creditor meeting on Feb 14 to vote on its US$11.5 billion restructuring plan. The company was sued recently in Hong Kong by a creditor seeking its liquidation, a month after another similar petition was dismissed.