China Oceanwide Holdings’ string of financial calamities continued on Wednesday, with an arbitration court freezing the company’s stake in a Wuhan project just days after its $410 million skyscraper development in Manhattan was seized by creditors.
The China International Economic and Trade Arbitration Commission (CIETAC) seized 97.72 million company shares in Wuhan Central Business District Co, where Oceanwide is a majority stockholder, according to a disclosure to the Shenzhen Stock Exchange.
In the statement, Oceanwide did not offer immediate hope of a resolution to the conflict, but said, “The company will continue to pay attention to the progress of the matter, actively negotiate solutions, and follow the relevant laws and regulations to fulfill obligations regarding information disclosure in a timely manner.”
In the arbitration investment management firm China Minsheng Trust is seeking compensation for Oceanwide’s unpaid debt of RMB 2.2 billion ($29.7 billion).
Seized and Liquidated Assets
The asset freeze comes as Beijing-based Oceanwide scrambles to liquidate assets after creditors foreclosed on some of its trophy ventures in the US in recent months.
Last week, lenders seized control of Oceanwide’s $410 million 80 South Street project, a 1,500 foot (457 metre) tower near the Brooklyn Bridge in Manhattan, after the company defaulted on a $165 million loan backed by the property.
Last October, creditors foreclosed on Oceanwide’s unfinished San Francisco mixed-use project, which comprises 54- and 61- storey twin towers with a million square feet (92,903 square metres) of office space, 265 residences and a 169-room Waldorf Astoria hotel. The property was put up as collateral for HK$2.5 billion ($320 million) in notes, which the company failed to repay on time.
This was followed by the $1.3 billion sale of tech media and investment firm International Data Group to funds managed by Blackstone in November. Before the transaction, IDG was owned by Oceanwide subsidiary Oriental Rainbow LLC.
Oceanwide continued to liquidate assets during the first quarter of this year, agreeing to sell its Kapolei West residential site in Hawaii to a local firm for $92.9 million. The property is being sold at a loss from the price of $103.4 million when the company bought the 484 acre (196 hectare) expanse in 2016.
More Turbulent Seas Ahead
“The situation appears to be worsening for Oceanwide, as CIETAC’s newly announced three-year freeze on the company’s shares in Wuhan Business District Co likely signals a deepening battle for the troubled firm’s assets,” veteran China investor and private equity executive Brock Silvers told Mingtiandi on Wednesday.
Silvers, who has been monitoring the developments closely, said in a previous interview that Oceanwide was unprepared for a major policy shift that saw over-gearing quickly change from a growth driver to a millstone.
“Regulators have indicated that overseas projects are a low priority, and China’s developers have been reducing exposure,” he said. “While Oceanwide has raised cash by selling completed onshore projects, its uncompleted offshore projects are attracting little interest, especially from wary onshore investors.”
Silvers said Oceanwide may never retake control of its defaulted offshore assets now, as the company’s total debts seem to exceed the proceeds of potential sales of its seized assets.
Furthermore, the investment expert said China’s real estate woes are far from over, amid dropping sales of new homes in 23 Chinese cities — a trend seen during the five-day holiday in the country earlier this month.