(Yicai Global) May 27 -- A court in China has frozen the equity of Tahoe Group that are owned by its controlling shareholder. The cash-strapped property developer’s stock price fell.

The equity accounts for about 58.3 percent of Tahoe Investment Group’s stake in the developer and 28.6 percent of the Fuzhou-based company’s overall share capital, it said yesterday.

The Beijing court froze the stake following a request from creditors, Tahoe Group said. Tahoe Investment offered joint liability warranty for the debts of its related firm, where a dispute arose between the guarantor and creditors, involving funds worth about CNY2.9 billion (USD409.8 million).

Tahoe Group’s shares [SHE:000732] closed 3 percent lower today at CNY4.2 (58 US cents).

Tahoe Investment has already initiated mediation and talks with the creditors and debtors, urging them to reach a solution and asking the borrower to pay off the debts as soon as possible.

Tahoe Group’s statement said that so far, the cumulative frozen shares held by Tahoe Investment and the entity acting in concert with it account for about 33.3 percent of the company’s total share capital.

In addition to the frozen shares, the value of pending interest-bearing debts of Tahoe Investment, as the principal debtor, reached CNY214 million last year, and the amount of outstanding interest liabilities due to the performance of guarantor’s obligations was CNY3.6 billion, of which the amount involved in litigation was CNY2.9 billion.

Tahoe Group is in urgent need of capital to ease the pressure on the company, which is experiencing a tight capital chain. Huang Qisen, the de facto controller and chairman of Tahoe Group, is now looking for strategic investors for the company.

On May 13, Tahoe Group disclosed that Its controlling shareholder Tahoe Investment was looking at introducing strategic investors and that the deal could lead to a change in firm’s controller. The introduction of strategic investors is still in the planning stage and the parties have not yet signed any equity transfer or cooperation framework agreements, amid uncertainties on whether such contracts can eventually be signed. Tahoe Group revealed that the main business of these strategic investors includes real estate.

Editor: Peter Thomas