SINGAPORE - Property giant City Developments (CDL) has rejected claims by Chinese firm Sincere Property Group that it held up decisions following a missed debt payment.
Sincere Property, which is CDL's joint venture investment in China, said the developer delayed decision-making, seriously affecting its ability to make use of opportunities to raise funds and improve cash flow.
It added that the problem was due to CDL requiring key matters to be submitted to the Singapore headquarters for approval instead of allowing Sincere Property's management and board to handle them.
Media reports said that according to investors, the statement came after Sincere missed a deadline to repay the principal on a bond that matured earlier this week.
The Singapore developer took control of the Chinese company last year. At the time, CDL said it was a "game-changing investment" for its expansion in China but it has since written off most of its investment, amounting to nearly $1.8 billion.
A CDL statement on Thursday (March 11) took issue with Sincere's claims.
"Sincere Property has misrepresented the circumstances, the actions surrounding the investment, the relationship between both parties and CDL's efforts to engage the joint venture partners to deal proactively with the challenging operating environment.
"There have been occasions where CDL could not support Sincere Property management's recommendations as they contravened CDL's corporate governance as a listed company and the recommended use of funds were not in the best interest of all shareholders."
CDL noted that it holds a joint controlling equity stake in the Chinese developer, and under the agreed legal structure, Sincere Property Holdings and CDL jointly control the joint venture on its material decisions.
Meanwhile, the existing operation team set up by Sincere Property Holdings continues to exercise direct oversight of its day-to-day operations and worksite matters.
CDL also responded to Sincere Property's suggestion that its corporate governance structure and its approval procedures saw major changes due to CDL's investment. It pointed out that Sincere Property has its own eight-member board of directors, with CDL holding four seats and the rest held by Sincere Property Holdings and Greenland Holdings Group.
"Even with four board seats, the legal structure of the joint venture does not accord CDL to have majority control of board decisions," CDL said.
It added that the firm's direct responsibility for day-to-day management is supported by its own staff of over 2,000 employees compared with fewer than eight seconded by CDL to the firm's headquarters in Shanghai.
CDL also noted that the liquidity issue faced by Sincere Property was inherent even before the investment due to the economic fallout of the pandemic and structural policy shifts in the real estate sector there.
"As a shareholder of the joint venture, CDL's intention has always been to support Sincere Property in restructuring its debt and improving its capital position," it said.
CDL commenced a strategic review late last year that involves restructuring the joint venture. But it said on Thursday that its efforts have yielded little progress apart from a transaction announced on Feb 22 which resulted in CDL acquiring a majority stake in a technology park project in Shenzhen.
"This transaction was in line with CDL's decision to limit, or ring-fence, further financial exposure to Sincere Property," it stated.
"Due to the complexities of the debt structure and cross-collaterals of Sincere Property's assets, the restructuring process has remained difficult and long-drawn amid an already challenging operating environment."
