Singapore CDL sells Chinese unit for a mere US$1 After US$1.4 Billion write-off

SINGAPORE, Sept 12 (Bloomberg): Singapore’s City Developments Ltd. is selling its stake in Chongqing Sincere Yuanchuang Industry Co. for a mere US$1, as it ends the tumultuous backing of the cash-strapped Chinese developer.

The real estate group will sell a 63.75% equity interest in HCP Chongqing Property Development Co -- which owns an 80.01% stake in Sincere, according to a statement published late Friday. The buyer is Sure Spread Ltd., an unrelated third party incorporated in the Republic of Seychelles.

City Developments, led by Chief Executive Officer Sherman Kwek, had already written down almost all of its S$1.9 billion ($1.4 billion) investment in Chongqing Sincere.

It acquired a majority stake in Sincere last April but the pandemic and China’s "three red lines” policy increased liquidity constraints at the unit, forcing losses on the broader Singaporean company.

The transaction takes into account "the current liquidity issues and potential bankruptcy reorganisation of Sincere,” City Developments said.

It also said it’s increasing its stake in a technology park in Shenzhen by transferring Sincere’s 15.4% holding in Shenzhen Tusincere Technology Park Development Co. to a wholly-owned subsidiary. The transfer is being considered a partial repayment of a loan.

The Sincere divestment and the Shenzhen Tusincere agreement "allow the Group to exit its investment in Sincere, and avoid being engaged in a possibly long drawn bankruptcy reorganisation of Sincere,” according to the statement.

All City Developments nominee directors and officers will resign from Sincere and its related companies after the divestment. The group said it will continue to assess the recoverability of the remaining balance of its financial exposure to Sincere. - Bloomberg