(April 8): Defaulted Chinese developer Shimao Group Holdings Ltd is facing a demand to liquidate from creditor China Construction Bank (Asia) Corp, one of the most prominent examples yet of a state-backed bank trying to claw back money from a distressed developer.

The so-called winding-up petition was filed on April 5 and is related to a financial obligation in the amount of HK$1.6 billion (RM972 million), according to a stock exchange filing from Shimao, whose landmark projects included five-star hotels in Shanghai. The developer said it will oppose the petition and continue to work toward an offshore restructuring that maximises value for its stakeholders.

“It’s possible that creditors are trying to use the winding-up petition as leverage to push the developer to make progress on restructuring,” said Jeff Zhang, an analyst at Morningstar Inc.

Winding-up petitions against Chinese property developers including Country Garden Holdings Co have piled up as creditors grow impatient with the pace of debt talks. Creditors have been emboldened by a Hong Kong court order for China Evergrande Group, the biggest casualty of the property crisis, to liquidate.

In a statement issued Sunday, Country Garden urged patience from its creditors with the restructuring progress and said that it has engaged Linklaters LLP as the principal legal adviser for its debt plan.

China Construction Bank (Asia) has previously sought to liquidate several other smaller developers. Its parent, China Construction Bank, was the fourth-largest arranger of offshore loans to Chinese companies in 2023, according to Bloomberg’s league table data.

Shimao, which was once an investment-grade company, first defaulted on offshore debt in July 2022, but an initial restructuring plan wasn’t released for 17 months. The company’s dollar bonds are mostly indicated at about three cents, underscoring how little investors expect to recoup. Its shares fell as much as 12% in Hong Kong trading Monday.

In 2020, Shimao was one of China’s top 10 largest developers by sales, with over 460 property projects in more than 100 cities in China, according to the builder’s website. As of the end of last year, the group employed 53,836 people and reported total liabilities of 492 billion yuan (RM323.59 billion), the firm’s latest annual results show.

A hearing on the winding-up petition is scheduled for June 26, according to Hong Kong’s judiciary website. The case number is HCCW 198/2024.

Shimao offered four options for creditors in its proposed terms for restructuring offshore debt last month, including swapping debt to notes or loans of six or nine years, or to zero-coupon mandatory convertible bonds. But the terms were rejected by a key creditor group that holds more than 25% of the company’s offshore bonds outstanding. The group has urged bondholders to oppose the debt plan.

It has been almost two years since Shimao’s default, and the industry hasn’t shown any sign of improvement, said Ting Meng, a senior credit strategist at Australia & New Zealand Banking Group Ltd. “Investors are losing patience and confidence in the prospect of a recovery,” she added.