China Minsheng Banking Corp. Ltd. (600016.SH +0.57%), the country’s largest privately owned lender by assets, is suing developer Oceanwide Holdings Co. Ltd. (000046.SZ +1.50%) and its de facto controller property tycoon Lu Zhiqiang over a 7 billion yuan ($1 billion) loan dispute.
The bank’s Beijing branch has filed a lawsuit against Oceanwide, Lu and two property developers based in the central Chinese city of Wuhan. The firms, namely Wuhan Centre Building Development Investment Co. Ltd. and Wuhan CBD Co. Ltd., failed to repay debts of 3.97 billion yuan and 3.05 billion yuan, respectively, China Minsheng said in a Friday stock exchange filing.
Oceanwide and Lu guaranteed the loans and are now on the hook to cover the outstanding liabilities. The lawsuit has been accepted by the Beijing Financial Court, according to the filing.
It has become common to see creditors pursuing developers for unpaid debt in China as the country’s real estate sector continues to suffer from a liquidity crunch. In recent years, scores of Chinese property companies have missed bond and loan repayments and consequently been cut off from much-needed funding sources. The country’s housing market remains in the doldrums despite government support.
Lu, who founded and chairs China Oceanwide Holdings Group Co. Ltd., Oceanwide’s parent, is also a vice chairman of China Minsheng. As of June 2022, the conglomerate and its related companies had 21.2 billion yuan of outstanding loans with the Shanghai- and Hong Kong-listed lender.
China Oceanwide and related entities also own a 5.8% stake in China Minsheng. Some 70.5% of that has been frozen, according to a filing on Thursday.
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Wuhan Centre Building Development Investment and Wuhan CBD took out loans of 4 billion yuan in 2018 and 3.07 billion yuan in 2020 from the lender’s Beijing branch, respectively. The companies secured them with land and construction projects.
China Minsheng is seeking the priority right to repayment of the mortgaged properties, or the proceeds from auction or sale of them, according to the Friday filing.
Contact reporter Zhang Ziyu (ziyuzhang@caixin.com) and editor Jonathan Breen (jonathanbreen@caixin.com)
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