Hong Kong-based private equity firm Gaw Capital Partners is rushing to extend a property-backed loan due Monday after a weekend of down-to-the-wire talks, according to people familiar with the matter, the latest case spotlighting broader strains in China’s property market.
Pressure has been mounting on the firm to extend the $110 million borrowing after it missed a payment just over a week ago on a separate facility.
The firm is seeking an extra three years to repay the loan, which is backed by a life science park project in Shanghai, but some lenders were pushing for an 18-month extension instead, the people added.
While several bankers involved in the talks expect an agreement to come together, the last-minute scramble underscores the difficulties involved in such deals. China’s property crisis has raised the risk of defaults on loans tied to real estate, making lenders wary about extending their exposure to the sector. That’s made it harder for borrowers to refinance maturing debt.
Just this month, a Gaw-managed fund missed payment on a separate $260 million loan tied to a Shanghai office tower, meaning that banks could declare a default on the facility. One of the lenders involved, Taiwan’s Hua Nan Commercial Bank Ltd., has demanded immediate repayment on the loan, though any enforcement would require majority consent, the people said.
Gaw declined to comment. Hua Nan didn’t offer a comment when reached by Bloomberg News on Monday.
Aside from Gaw, Hong Kong developer Parkview Group Ltd. has also been involved in last-minute loan talks over a property-backed facility. The company secured a one-month extension on a $940 million loan earlier this month, easing its risk of default while it tries to negotiate a longer-term deal.
Separately, Gaw last week reached an agreement to refinance a $207 million-equivalent loan that matured this month, tied to four office towers in Shanghai.
The sometimes prolonged refinancing talks highlight the challenges in China’s commercial real estate sector. Grade-A office market rents in Shanghai, for example, fell further in the third quarter, dropping by 4.1% from the previous three months, according to Knight Frank.
Real estate consultancies and economists expect it to take years for the excess supply of commercial buildings in the country to be absorbed.
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