Hong Kong Stock Exchange: SRE Group Ordered to Sell Majority Stake in Shanghai Joint Venture

Hong Kong Stock Exchange: SRE Group Faces Court Mandate

A Shanghai court has mandated Chinese developer SRE Group to divest its majority interest in a joint-venture company due to a failure to settle 4.45 billion yuan (US$627 million) in debts. This was disclosed in a filing to the Hong Kong Stock Exchange. SRE, a division of China Minsheng Investment Group, indicated that four units, holding a combined 51% of Shanghai Jinxin, could not meet their obligations under a court order.

Judicial Action and Developer Challenges

The Shanghai Financial Court's action highlights escalating creditor efforts to compel distressed Chinese developers to pay debts. SRE is currently engaged in negotiations with lenders to mitigate potential legal repercussions resulting from this ruling.

Main Project and Financial Overview

Shanghai Jinxin's primary venture involves the development of the Shanghai Daxing Road project located in Huangpu district. Spanning 37,129 square metres, the project aims to construct luxury residential and commercial spaces, with presale approvals expected by 2026.

Operating across more than 10 cities in Mainland China, SRE reported a loss of 268 million yuan in 2022, a stark fall from a reported profit in the previous year. The company's shares have been suspended on the Hong Kong Stock Exchange since April 2023.

Market Sentiment and the Future

S&P Global Ratings highlights that the real estate sector has seen a significant rise in bond defaults, complicating the operational landscape for developers like SRE. The financial struggles of other notable developers, such as China Evergrande Group and Dexin China Holdings, emphasize the critical state of China’s housing market.