China Oceanwide Sued by Mainland Bank Over $1B in Loan Guarantees

China Oceanwide Holdings has fallen foul of China Minsheng Bank, which is suing the cash-strapped builder and its former chairman, Lu Zhiqiang, over a RMB 7 billion ($1 billion) loan dispute centred on the developer’s 88-storey office tower in downtown Wuhan.

Oceanwide and Lu failed to fulfil their obligation to guarantee loans extended to two project companies in the amounts of RMB 3.97 billion and RMB 3.07 billion, Minsheng Bank said in a Friday filing with the Hong Kong stock exchange. Only RMB 20 million of the total has been repaid, according to the Beijing-based bank.

The loans are secured by Wuhan Center, a 438 metre (1,437 foot) tall building with more than 300,000 square metres (3.2 million square feet) of floor space, and five pieces of land in the area.

Minsheng Bank has asked the Beijing Financial Court to order the project companies to repay the amounts owed, plus interest, expenses and penalties, and is also seeking the proceeds from any auction or sale of the properties.

Well Acquainted

A familiar face in the Minsheng boardroom, Lu serves as a vice chairman at the bank and holds a personal stake in the company of 5.08 percent.

The bank’s lawsuit is the latest setback in Wuhan for Oceanwide after an arbitration court froze the company’s stake in the downtown project last year.

The China International Economic and Trade Arbitration Commission seized 97.72 million company shares in Wuhan Central Business District Co, where Oceanwide is a majority shareholder, according to a May filing with the Shenzhen Stock Exchange.

The stake freeze came just days after lenders took control of Oceanwide’s $410 million 80 South Street project, a 457 metre tower near the Brooklyn Bridge in Manhattan, after the company defaulted on a $165 million loan backed by the property.

Overseas Liquidation

Oceanwide’s liquidity issues have led to a series of attempted asset sales from the developer’s overseas real estate portfolio, with mixed results.

Last month, the company announced that it had failed for a third time to sell its halted $1.6 billion San Francisco megaproject, Oceanwide Center. The news came a week after Oceanwide said it had found a potential buyer for another problematic property, the developer’s unfinished, $1.2 billion Oceanwide Plaza in downtown Los Angeles.

In late December, Oceanwide announced that it had completed the sale of a residential site on Oahu to a US company for $95 million. The site was one of three parcels on the Hawaiian island that were bought by the company in 2016, with none of them having progressed past the design phase.