SINGAPORE - Mr Kwek Leng Peck has resigned from his position as non-executive and non-independent director of City Developments Ltd (CDL), a post he held for over 30 years, after clashing with the property giant's board and management.
Mr Kwek, 64, is the cousin of Kwek Leng Beng, the billionaire executive chairman of CDL who also helms the Hong Leong group of companies, and the uncle of CDL's group chief executive Sherman Kwek.
In his letter of resignation, Mr Kwek Leng Peck cited "disagreements with the board and management in relation to the the group's investment in Sincere Property Group and its continuing provision of financial support to Sincere", according to a company filing with the Singapore Exchange during the midday trading break on Wednesday (Oct 21).
Also cited were his reservations with the group's approach in the management of Millennium & Copthorne Hotels (M&C). CDL took M&C private last year, and the British company was subsequently delisted from the London Stock Exchange.
CDL said the group's total investment in Sincere includes a 51 per cent joint venture equity investment in Sincere of 4.4 billion yuan (S$896.8 million), US$230 million (S$311.7 million) subscription of bonds issued by Sincere and a working capital loan of 650 million yuan.
In addition, the group also provided a liquidity support undertaking totalling 1.5 billion yuan relating to the bonds issued by Sincere that are maturing next Monday, and a 1.5 billion yuan corporate guarantee in relation to an external bank loan obtained by Sincere. The total of these investments is $1.9 billion.
"The liquidity position at Sincere is challenging, being severely impacted by the Covid-19 pandemic and property cooling measures which caused the further tightening of liquidity for real estate companies in China, the most recent being China's Three Red Lines," CDL said.
This refers to metrics regarding debt that developers will have to meet if they want to borrow more.
"The intended asset divestment plan for some of Sincere's retail, hospitality, office and business parks assets, to lighten its debt load on investment properties exposure and to shore up its residential development plans as a key strategy to transform this platform, is now expected to take place over a longer period of time due to the current climate," CDL said.
The board is in the process of identifying and appointing an external financial adviser to assist with further evaluation and review of the group's investment in Sincere. The impact on the group or its financial reporting will be prepared and calibrated together with the external financial adviser, CDL said.
M&C is a wholly-owned subsidiary of CDL which owns, manages and operates over 145 hotels globally. Listed on the London Stock Exchange in 1996, M&C was delisted on Oct 11, 2019 following a privatisation exercise by CDL.
"2020 has been a difficult year for the hospitality and tourism sector. In 1H 2020, the Group's hotel operations segment recorded a substantial pre-tax loss of $208.2 million, which included $33.9 million of impairment losses made in view of the current pandemic," CDL said.
Mr Kwek Leng Peck's exit from CDL took effect on Monday. He sits on the board of 81 other companies as of Monday, including CDL's substantial shareholders Hong Realty (Private) Limited, Hong Leong Holdings Limited and Hong Leong Investment Holdings Pte Ltd.
CDL shares fell 55 cents or 7.2 per cent to $7.08 at the close on Wednesday, after resuming trading at around 1:30pm. The company had requested a trading halt before the stock market opened on Wednesday.