The owners of China’s Nam Tai Property have scored a victory in their legal battle against Shenzhen-based builder Kaisa Group Holdings, with a Hong Kong arbitrator dismissing Kaisa’s $146.9 million claim against Nam Tai over a disputed private placement.
The arbitration ruling quashes a reimbursement request for a payment Kaisa made for Nam Tai shares under a private investment in public equity (PIPE) deal that was executed in 2020 and later voided by a BVI court. The arbitrator also accepted counterclaims advanced by Nam Tai, the company said Monday in a release.
Nam Tai, which came under the control of a board proposed by US activist shareholder IsZo Capital Management in 2021, said the arbitrator’s binding decision provides a path for the firm to access $89 million in funds frozen in a Credit Suisse bank account. The developer’s previous Kaisa-dominated board had reportedly invested the proceeds from the PIPE deal into an ill-fated Credit Suisse supply chain fund.
“The company does not yet have access to the funds in this account and cannot accurately estimate at this time when it will be able to access such funds,” Nam Tai said.
PIPE Up in Smoke
The PIPE deal was nullified in 2020 by the British Virgin Islands Commercial Court, which ruled that Nam Tai’s board — then dominated by Kaisa-linked figures — had acted improperly when it initiated the transaction, which saw Kaisa’s shareholding balloon from 23.9 percent to 43.9 percent after the manoeuvre.
In early 2021, the Eastern Caribbean Supreme Court upheld the lower court’s decision and ordered Nam Tai to hold a special shareholder meeting to decide the fate of the board — two key demands of a shareholder group led by IsZo, a fund manager that owned about 11 percent of New York-listed Nam Tai’s shares before the disputed PIPE deal.
The court said the evidence presented by the parties supported IsZo’s contention that the private placement was a ploy to boost Kaisa’s stake in Nam Tai to a sufficient level as to block attempts to convene a shareholder meeting, and ultimately to avoid a change in control at the board level.
“In my judgment, whatever the formal corporate governance status of these directors, in reality they were heavily committed to supporting Kaisa’s de facto control of Nam Tai,” the presiding justice said in the court statement. “I find that the four directors were not, as a matter of fact, independent of Kaisa.”
Struggle for Control
Deutsche Bank seized Kaisa’s Nam Tai shares after the troubled developer defaulted on a loan from the German lender in 2021, according to a Financial Times report.
The bank last year sold the 20 percent stake to Hong Kong-based Oasis Capital Management, which is now the largest shareholder in Nam Tai, with IsZo retaining a 17.7 percent interest.
Nam Tai’s reconstituted board has since struggled to gain control over the builder’s onshore operations, which include a pair of industrial parks in Shenzhen, because sacked executives Wang Jiabiao and Zhang Yu remain in possession of the company’s chops — the traditional stamps required for conducting business in China.