SINGAPORE (BLOOMBERG) - The Chinese real estate company acquired by City Developments Ltd (CDL) is accusing its buyer of holding up decisions following a missed debt payment, underscoring the challenges for foreign companies making acquisitions in the world's second-largest economy.
Chongqing Sincere Yuanchuang Industrial - commonly referred to as Sincere Property Group - said CDL delayed decision making, stalling opportunities to raise funds and improve cash flow, according to a statement posted on Sincere's website.
The statement came after Sincere missed a deadline to repay the principal on a bond that matured earlier this week, according to investors. It signals a rift between Sincere's local management team and CDL's headquarters after the Singapore developer took control of the Chinese company last year. At the time, CDL dubbed the deal as "game changing" for its expansion in China but it has since written down most of its $1.9 billion investment.
Sincere said that CDL "severely affected" its ability to use fundraising and asset disposals to improve operations and cash flow. It said the problem stemmed from CDL's refusal to let Sincere's management and board handle key decisions, instead requiring that the parent's headquarters in Singapore sign off on important matters.
Sincere paid interest on Thursday (March 11) for its bond due Tuesday, though investors are still waiting for a principal payment of 444.5 million yuan (S$91.89 million), according to two bondholders who aren't authorised to speak publicly and asked not to be identified.
CDL didn't immediately respond to a written request seeking comment. A representative of Sincere declined to comment.
Sincere's comments signal a souring of working ties with CDL. Back when the deal to acquire 51 per cent of Sincere was signed last April, CDL's chief executive officer Sherman Kwek hailed the relationship between the companies, saying he had known the Chinese firm's founder and chairman Wu Xu for 10 years.
But when CDL reported the $1.78 billion writedown last month, chairman Kwek Leng Beng hinted that things weren't going smoothly. CDL still has to get Mr Wu's consent before it can monetize Sincere's numerous assets, he said.
"He has a different view from us," Mr Kwek said, hoping that Mr Wu will cooperate with CDL. Nevertheless, Mr Kwek expressed optimism that Sincere could become "a very ideal entity that everybody wishes to buy."
