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Cheung Kei Group, owned by troubled Chen Hongtian, will sell equity in offshore businesses

Cheung Kei Group, a private mainland developer under Chen Hongtian's management in Shenzhen, disclosed on Monday a strategy to solve its "short-term cash flow problem" by selling equity in some foreign assets.

Two properties in Canary Wharf, London, are presently going through restructuring, according to a company announcement published on the social networking site WeChat.


According to the company's statement, "Like all companies with heavy assets, Cheung Kei has also encountered a short-term cash flow problem."


"We hope all sectors of the society, especially the media and the public, have more understanding and tolerance for entrepreneurs and look at the enterprises’ mild mortgage default problem in a rational perspective," it stated.


The statement from Cheung Kei Group omitted a specific reference to the media outlet. However, the declaration comes in response to media allegations regarding the company's financial issues on websites like Sohu.com and WeChat.


Three properties owned by the Cheung Kei Group in Hong Kong, including a 9,212 square foot house at 15 Gough Hill Road, an apartment in Opus Hong Kong in the eastern Mid-Levels, and the Cheung Kei Center business complex in Hung Hom, were seized by creditors in March as a result of mortgage defaults.

According to Cheung Kei Group, the three assets were mortgaged with banks for roughly HK$6 billion but are now worth about HK$10 billion.


"The scale and quality of Cheung Kei Group’s overall assets are very high while its debt ratio is at a relatively low level among others in the industry," the business noted without going into financial details. According to the business, it is actively negotiating repayment terms with the appropriate financial institutions.


Chen established the Cheung Kei Group in 1990, which includes locations in Shenzhen and Hong Kong. According to the company's website, it specializes in real estate investment and has a number of hotels and office buildings in Southeast Asia, Shenzhen, Hong Kong, and London.


One Harbour Gate East Tower in Hung Hom, which was one of Chen's confiscated assets and is valued HK$7 billion, was put up for sale by its receivers earlier this month. The billionaire said that he is in talks with lenders to get back his seized assets in an interview with The Washington Post this month.


After years of fast expansion supported by Beijing's five-year plans' emphasis on urbanization, China's enormous real estate market faced a speed bump when the "three red lines" regulation required many private developers to reduce their debt loads. The policy, which was introduced in August 2020, produced a wave of defaults and severe financial suffering throughout the mainland real estate industry. The pursuit of the three red lines policy, which set requirements for property companies' cash to short-term debt, liability to asset, and net gearing ratios, caused an unheard-of collapse in the sector. Industry leader China Evergrande Group saw its borrowing balloon to exceed US$300 billion by 2021, nearly doubling its 2015 levels. This rise was fueled by a debt binge.


According to Cheung Kei Group, "in the current difficult economy, irrationality can only lead enterprises to fall into more unnecessary troubles, which is of no benefit to individuals, enterprises, financial institutions, or even the society."

By fLEXI tEAM


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