City Developments has entered a deal to exit its holding in Chongqing Sincere Yuanchuang Industry, or Sincere, for US$1, in a move to ring-fence the impact of a troubled investment.
Under the deal, City Developments’ wholly owned subsidiary Sonic Investment will sell its 63.75 percent stake in HCP Chongqing Property Development to Seychelles-incorporated, unrelated third party Sure Spread for US$1, the Singapore-listed property developer said in a filing to SGX late Friday.
HCP Chongqing Property Development, also known as HCP Cayman, holds 80.01 percent of Sincere, the filing said.
City Developments said the deal pricing was reached after taking into account Sincere’s current liquidity issues and potential bankruptcy reorganisation.
An impairment of S$806 million had already been made on City Developments’ cost of investment in HCP Cayman, and after taking into account its share of loss of S$76 million, the cost of investment has been reduced to zero, the filing said.
That followed City Developments’ announcement in February that it took a one-off, non-cash S$1.78 billion write down on its investment in Sincere. In 2020, City Developments had called its acquisition of a 51.01 percent stake in Sincere for around S$1.1 billion as a “historic transformational deal.”
In the announcement Friday, City Developments also said that via wholly owned subsidiary Suzhou Global City Genway Properties, has entered a deal for Sincere to transfer a 15.4 percent interest in Shenzhen Tusincere Technology Park Development to Suzhou Global City as partial repayment of a loan. Sincere had pledged the 15.4 percent stake as security for the loan, which City Developments had provided as liquidity support in 2020, the filing said.
Shenzhen Tusincere is the holding company of a 65 percent interest in Shenzhen Longgang Tusincere Tech Park, with the remaining 35 percent held by state-owned enterprise Shenzhen Longgang District, the filing said.
In February, City Developments had acquired an 84.6 percent interest in Shenzhen Tusincere, with the transfer of shares making Shenzhen Tusincere a wholly owned subsidiary, and giving the Singapore-listed company a 65 percent effective interest in Shenzhen Tech Park, the filing said.
The Shenzhen Tusincere deal will give City Developments direct operational control over the project management at Shenzhen Tech Park, letting the company ringfence its investment, the filing said.
The deal will reduce City Development’s S$117 million exposure to Sincere, as of 30 June, by the fair value of the transfer, the filing said.
“The group will continue to assess the recoverability of the remaining balance of its financial exposure to Sincere,” City Developments said. “The board is of the view that the Sincere Divestment and the Shenzhen Tusincere Agreement are in the best interests of the group as these allow the group to exit its investment in Sincere, and avoid being engaged in a possibly long drawn bankruptcy reorganisation of Sincere.”