Citi Files Winding-Up Petition Against China’s Logan Group in Hong Kong

Logan Group has become the latest defaulting Chinese developer to get socked with a winding-up petition, with a unit of banking giant Citigroup taking action against the builder and a pair of subsidiaries in two separate courts.

On 4 November, Logan received the petition filed by Citicorp International Ltd against the parent company in the Grand Court of the Cayman Islands and against subsidiaries Kam Wang (Hong Kong) Investments Co Ltd and Yuen Ming (Hong Kong) Investments Co Ltd in the High Court of Hong Kong, the Shenzhen-based company said Monday in a filing with the Hong Kong stock exchange.

Hong Kong-headquartered Citicorp International is the trustee of a series of 5.75 percent senior notes maturing in 2025 with a total issue size of $300 million, one of five sets of offshore bonds for which Logan ceased making interest payments in August.

“The board of directors of the company is of the view that the petitions do not represent the interests of other stakeholders and may impair the value of the company,” Logan chairman Kei Hoi Pang said in the filing. “Therefore, the company will seek legal measures to oppose the petitions, and take all necessary actions to protect its legal rights.”

Engaging Creditors

Logan said it has engaged in constructive dialogue with offshore creditors since August and has obtained support intention letters from many of them. Bloomberg reported in September that the company was in talks with creditors on restructuring more than $6 billion in offshore debt.

“The petition may lead to the company’s other creditors demanding acceleration of repayment,” Logan said, adding that it has yet to receive any notice regarding acceleration of payment by holders of the four remaining sets of bonds.

Logan’s HKEX-listed shares were down more than 16 percent on Tuesday afternoon after a brief trading suspension since Monday.

The developer saw its credit downgraded by the major global credit agencies in March, with Fitch Ratings noting the company’s poor liquidity and failure to disclose off-balance-sheet private debt arrangements. Fitch withdrew its ratings for Logan in April.

The company has vowed to dispose of assets when needed at reasonable prices, having made a start in April with a deal to sell 40 percent of an expressway project in southwestern China to Hong Kong’s New World Group for RMB 1.9 billion ($290 million).

List Stretches On

Logan joins a laundry list of troubled mainland developers targeted with winding-up petitions by stiffed creditors and disgruntled investors.

After petitions were filed against Fantasia Holdings and China Oceanwide Holdings at mid-year, the world’s most indebted developer, China Evergrande, in late June was sued by an investor in the builder’s Fangchebao online platform over an alleged failure to honour a repurchase agreement. A hearing on the Evergrande case was due to resume this week.

Further petitions have been lodged against Sunac China Holdings, former Goldin Financial chairman Pan Sutong’s holding firm and a unit of Yango Group, which in October became the first major builder to receive a wind-up order issued by a Hong Kong court.

One of the few defaulters to dodge a winding-up petition so far, Kaisa Group Holdings, announced Monday that its Kaisa Capital Investment Holdings subsidiary had changed auditors, with Baker Tilly replacing Grant Thornton after the latter resigned over an audit fee dispute, according to the statement.