(Yicai Global) Feb. 5 -- Ping An Insurance Group is facing an exposure of CNY54 billion (USD8.3 billion) in heavily leveraged property developer China Fortune Land Development and will set aside provision as necessary, China’s biggest insurer by market value said yesterday.

The CNY54 billion exposure, however, doesn’t mean a CNY54 million loss, Ping An General Manager Xie Yongli said, adding that Ping An, which is the Beijing-based developer’s second largest shareholder with a 25 percent stake, holds one third of this amount in equity and the rest in debt.

Fortune Land has failed to repay CNY5.3 billion (USD813.4 million) in loans due to a cash crunch, the developer said on Feb. 1. It had racked up debts of CNY222.6 billion (USD34.3 billion) as of last September, CNY117.7 billion of which is due to mature this year, and it only has CNY800 million (USD123.5 million) in available funds, it said, sparking a creditor crisis.

A creditor committee was immediately formed that day led by Ping An and Industrial and Commercial Bank of China and a meeting convened with the Hebei provincial government, China’s central bank, the China Banking and Insurance Regulatory Commission and over 230 financial institutions to try to find a way out.

Fortune Land’s debt issues are due to the Covid-19 pandemic, the firm’s aggressive expansion and a tight regulatory environment in the real estate markets around Beijing which is hampering payment collection, Chairman Wang Wenxue said at the meeting.

The real estate giant is only part of Shenzhen-based Ping An's CNY8 trillion (USD1.2 trillion) investment portfolio, Xie said. Ping An was attracted to invest in Fortune Land due to its ‘new city’ business model, where it develops a location, invites in industries and supports the local government.

Trading in Fortune Land’s shares [SHA:600340] was suspended on Jan. 29 as it prepares to issue new shares to raise more capital. Its stock price closed down 2.45 percent at CNY9.45 (USD1.46) on Jan. 28, giving it a total market capitalization of CNY37 billion (USD5.7 billion).

Shenzhen-based Ping An's shares [SHE:601318] closed up 0.13 percent at CNY79.72 (USD12), 9 percent below its trading price in mid-January when rumors of a default at Fortune Land first started.

Editor: Kim Taylor