CDL to continue limiting exposure to China unit facing bankruptcy claim

Singapore property group City Developments Limited (CDL) has said it will continue to limit further exposure to a China unit, which is now facing a bankruptcy claim.

CDL reiterated in a filing to the Singapore Exchange on Thursday that it has "ring-fenced its current financial exposure" to its investment in Sincere Property, and will not support the unit's continuing financial obligations.

"Despite the bankruptcy proceedings, the group will continue to strenuously protect its position and limit further exposure," said CDL.

It added that it is aware of the bankruptcy claim filed by creditor Beijing Yi He Mercury Investment against Sincere Property.

CDL was also told that Sincere Property would announce this bankruptcy claim on the Shanghai Stock Exchange.

Bloomberg reported earlier that Sincere Property may undergo court-led restructuring after the bankruptcy application.

The Beijing-based creditor filed the petition with a court in Chongqing on Monday.

In February, CDL booked an impairment loss of $1.78 billion on its Sincere Property investment, effectively writing down 93 per cent of its total investment in the unit.

"Having recognised the substantial impairment in the financial year 2020, the group's remaining exposure amounts to only $126 million as at Dec 31," CDL said in its Thursday filing.

Citi analyst Brandon Lee said that he expected the news surrounding Sincere Property to result in a "knee-jerk negative reaction" on CDL, The Business Times reported.

However, CDL should still see some buying interest among long-term value-oriented investors, given its "significant underperformance" in the year to date and undemanding valuations, he added.

CDL shares closed up 15 cents, or 2.2 per cent, to $6.99 yesterday, reversing its 2.4 per cent fall on Thursday.

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A version of this article appeared in the print edition of The Straits Times on July 10, 2021, with the headline CDL to continue limiting exposure to China unit facing bankruptcy claim. Subscribe