SINGAPORE - China International Holdings had agreed to enter into a settlement agreement of 105 million yuan (S$21.6 million) despite believing that the claim is "baseless and unmerited", so as to avoid a protracted dispute with the municipal and district governments in China.
It said this late on Friday night, (Dec 29) in response to a query by the Singapore Exchange (SGX) over a settlement agreement that its 50 per cent owned associate Yichang Xinshougang Property Development (XSG) had recently entered into, with Yiling District Urban Infrastructure Investment Company (YDUIIC).
YDUIIC had in March 2017 filed a claim against XSG for the repayment of an alleged loan of 105 million yuan, and accrued interest of 52 million yuan.
YDUIIC claimed that the sum was a loan, while China International and XSG claimed that it is an award by the Yichang government in Hubei.
On Dec 18, China International said that XSG has agreed to pay 105 million yuan to YDUIIC before the end of 2017. YDUIIC will then withdraw all claims on and actions against XSG after receiving this payment.
In its response to SGX's query on Friday night, China International said that its position, and also that of XSG, remains unchanged despite the two companies entering into the settlement agreement.
The decision by XSG, supported by China International, to enter into the settlement agreement does not constitute an admission that the sum was a loan, it said. Instead, the agreement was made to "avoid the risk of a potentially long and protracted dispute with the municipal and district governments in Yichang city, Hubei province".
The company and XSG believe that the dispute should be settled as soon as possible, to pave the way for the next stage in the development of the Guobinyihao project, it added.
SGX also noted that in the sale and purchase agreement in 2012, China Resources and Transportation Group Limited (CRTGL), which is listed in Hong Kong, had undertaken to be responsible for any claims by the China government in relation to the 105 million yuan received from YDUIIC.
China International had bought a 55 per cent stake in XSG from CRTGL then, for HK$550 million (S$94.2 million) in cash.
China International said in response that it is exploring all options, including making a claim against CRTGL pursuant to the terms of the sale and purchase agreement. XSG may also consider claiming the award sum directly from the Yichang government, it revealed.
The firm also agreed to SGX's request for monthly updates on the claiming of damages from CRTGL.