City Developments, which is controlled by billionaire Kwek Leng Beng, announced Thursday that it will not continue to support its cash-strapped Chinese subsidiary Sincere Property Group, which is facing a bankruptcy claim from one of its creditors.
Beijing Yi He Mercury Investment Co., a creditor of Sincere Property, filed a bankruptcy petition against the Shanghai-based developer on July 5 in China’s Chongqing No. 5 Intermediate People’s Court, City Developments said in a statement to the Singapore Exchange.
As previously announced, the group stated that it has ring-fenced its current financial exposure to its investment in Sincere Property and will not support Sincere Property’s ongoing financial obligations. “Regardless of the outcome of the bankruptcy proceedings, the group will work diligently to protect its position and limit future exposure.”
City Developments had written off S$1.8 billion ($1.3 billion) in Sincere Property investments, eroding 93 percent of the company’s total stake in the Chinese developer. As a result of the write-down, Singapore’s second-largest builder by market value posted a net loss of S$1.9 billion in 2020, its worst performance in the company’s 58-year history.
“As an investor and creditor of Sincere Property, the group will closely monitor the situation and take appropriate corporate and legal action,” City Developments said, adding that its remaining exposure to Sincere Property is S$126 million as of December 2020.
In April 2020, as the Covid-19 pandemic began to wreak havoc on the global economy, City Developments acquired a controlling interest in Sincere Property. The investment sparked a feud with Kwek’s cousin, Kwek Leng Peck, who resigned from the company’s board of directors in October. Two independent directors resigned in December, citing their disagreement with the investment decision.
Kwek, 80, addressed the board of directors’ disagreement in a letter to Singapore newspapers on Jan. 6.
“When management presents a business strategy, the board should ask pointed questions and express concerns candidly and forcefully,” Kwek wrote in the letter. “Recommendations and constructive feedback can be offered to help refine the strategy. However, once a collective decision has been reached, whether unanimously or by majority vote, a director who previously disagreed should now support its successful implementation.”
Kwek is the chairman of City Developments and the Hong Leong Group in Singapore, which his father founded in 1941. His cousin, also a billionaire, Quek Leng Chan, runs a separate group in Malaysia called Hong Leong. Kwek was Singapore’s 12th richest person, with a net worth of $3 billion, according to the World’s Billionaires List. Sherman, his eldest son, has served as City Developments’ group CEO since 2018.