Struggling Developer South City Gets USD240 Billion Bail Out From Shenzhen Gov’t
Zhang Huimin
DATE:  May 17 2022
/ SOURCE:  Yicai
Struggling Developer South City Gets USD240 Billion Bail Out From Shenzhen Gov’t Struggling Developer South City Gets USD240 Billion Bail Out From Shenzhen Gov’t

(Yicai Global) May 17 -- Debt-ridden China South City Holdings has sold a majority stake to a company under the Shenzhen municipal government for HKD1.91 billion (USD240 billion) in the first such take-over by a Chinese real estate developer this year.

Shenzhen Special Economic Zone Construction and Development Group now holds 29.28 percent equity, the builder of logistics facilities and commodity trading centers said yesterday. Founder Zheng Songxing’s stake has been diluted to 20.16 percent from 28.5 percent making him the second-largest shareholder.

Creditors were quick to approve the transaction as ownership by a state-owned entity will help South City leverage funds at a relatively low cost and apply for debt extensions.

The take-over was first announced by South City in December last year, and the subscription price set at HKD0.57 (USD0.07) per share. South City said at the time that it expected the net proceeds from the share sale to reach HKD1.8 billion which it would use to repay its debts and as general working capital.

But despite the cash injection, South City still has a mountain of debt to repay and the recent Covid-19 outbreaks and changes in the global trading environment are all affecting business. As of the end of September last year, the Hong Kong-based developer had amassed debts of HKD36.6 billion (USD4.7 billion) with an asset-liability ratio of 65.74 percent.

South City has three US dollar bills worth USD977 million that that will mature over the next 12 months. On Jan. 20, the company said that it was seeking to extend the maturity dates of two of them, one from Feb. 12 to Aug. 12 and the other from June 26 to Oct. 26. It

South City’s stock price [HKG:1668] closed down 1.33 percent at HKD0.74 (USD0.09) today.

Editors: Tang Shihua, Kim Taylor

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Keywords:   New Controlling Shareholder,Debt Crisis,Property Developer,SEZ Construction & Development Investment Holding,China South City Holdings