China South City’s State-Owned Shareholder Faces Pressure

City-owned Shenzhen SEZ Construction and Development Group Co. Ltd., or Shenzhen CDG, is under pressure from onshore regulators to speed up the resolution of Hong Kong litigation over its keepwell protection of investee China South City Holdings’ offshore notes, according to one buyside source citing people directly involved in the matter and one sellside source. Citicorp International Ltd., the trustee of China South City’s offshore USD notes, filed a writ of summons on June 3 with the Hong Kong High Court against Shenzhen CDG, demanding $1.407 billion in total over its breaches of keepwell deeds provided to China South City’s five offshore notes, as reported. One of the sources cited a person involved as saying that the emergence of the high-profile keepwell dispute has prompted onshore regulators to discourage Shenzhen CDG’s plans to issue domestic notes. On 19 June, China’s securities regulator – the China Securities Regulatory Commission, or CSRC – posted a notice (Chinese) stating that it had agreed to terminate the registration process for a planned domestic corporate bond following a request received on June 13 from Shenzhen CDG and the lead underwriters. Keepwell Litigation Shenzhen CDG, 100% owned by Shenzhen State-Owned Assets Supervision and Administration Commission, or[...]