By Ishika Mookerjee
(Bloomberg) — Singapore’s City Developments Ltd. is selling its stake in Chongqing Sincere Yuanchuang Industry Co. for $1, ending its turbulent backing of the cash-strapped Chinese developer.
The property group will sell a 63.75% stake to HCP Chongqing Property Development Co., which owns an 80.01% stake in Sincere, it said in a statement released late Friday. The buyer is Sure Spread Ltd., an independent third-party company based in the Republic of Seychelles.
City Developments, under CEO Sherman Kwek, had already written off almost all of its 1.9 billion Singapore dollars ($1.4 billion) investment in Chongqing Sincere. The company acquired a majority stake in Sincere last April, but the pandemic and China’s “three red lines” policy increased the unit’s liquidity constraints and forced losses on the larger Singaporean company.
The transaction takes into account “Sincere’s current liquidity issues and potential bankruptcy reorganization,” City Developments said.
The company also announced that it will increase its stake in a technology park in Shenzhen by transferring Sincere’s 15.4 percent stake in Shenzhen Tusincere Technology Park Development Co. to a wholly owned subsidiary. The transfer will be considered a partial repayment of a loan.
The divestment of Sincere and the agreement with Shenzhen Tusincere “will enable the Group to exit its investment in Sincere and avoid a potentially lengthy insolvency reorganization of Sincere,” the statement said.
All City Developments’ nominees and officers will resign from their positions with Sincere and its affiliates following the disposal. The group said it will continue to assess the recoverability of its remaining financial commitment to Sincere.
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© 2021 Bloomberg L.P.
