Singapore Billionaire Kwek Leng Beng’s City Developments To Limit Exposure In China Unit…

City Developments—controlled by billionaire Kwek Leng Beng—said Thursday it will not support the continuing financial obligations of its cash-strapped Chinese subsidiary Sincere Property Group, which faces a bankruptcy claim by one of its creditors.

Beijing Yi He Mercury Investment Co., a creditor of Sincere Property, has filed a bankruptcy claim against the Shanghai-based real estate developer at Chongqing No. 5 Intermediate People’s Court in China on July 5, City Developments said in a statement to the Singapore Exchange.

“As announced previously, the group stated that it has ring-fenced its current financial exposure to its investment in Sincere Property and it will not support the continuing financial obligations of Sincere Property,” City Developments said. “Despite the bankruptcy proceedings, the group will continue to strenuously protect its position and limit further exposure.”

City Developments had written off  S$1.8 billion ($1.3 billion) on its investments in Sincere Property, impairing 93% of its total investments in the Chinese developer. As a result of the write down, Singapore’s second-largest builder by market value posted a S$1.9 billion net loss in 2020, its worst performance in its 58-year history. 

“The group will closely monitor the situation and embark on the appropriate corporate and legal action as an investor and creditor of Sincere Property,” City Developments said, adding that its remaining exposure to Sincere Property amounts to S$126 million as of December 2020.

City Developments took a controlling interest in Sincere Property in April 2020 as the Covid-19 pandemic started to wreak havoc on the global economy. The investment had sparked a disagreement with Kwek’s cousin, Kwek Leng Peck, who stepped down from the company’s board in October. In December, two independent directors—who also disagreed with the investment decision—resigned. 

Kwek, 80, addressed the disagreement in the company’s board in a letter to Singapore newspapers on Jan. 6.

“When the management presents a business strategy, the board should ask tough questions and raise concerns openly and robustly,” Kwek said in the letter. “Recommendations and constructive advice can be made to refine the strategy. But once a collective decision is made, unanimously or by majority votes, a director who may have disagreed, should now support its successful implementation.”

Kwek is the chairman of City Developments and Singapore’s Hong Leong Group, which was founded by his father in 1941. His cousin Quek Leng Chan, also a billionaire, runs a separate group in Malaysia, also called Hong Leong. Kwek was ranked Singapore’s 12th-richest person on the World’s Billionaires List with a net worth of $3 billion. His eldest son Sherman has been group CEO of City Developments since 2018.