PE Firm Gaw’s Last-Minute Loan Talks Flag China Property Strains

Hong Kong-based private equity firm Gaw Capital Partners is rushing to extend the real estate-backed loan due Monday after low-key talks over the weekend, according to people familiar with the matter; The latest case highlights broader tensions in China’s real estate market.

Pressure is mounting on the firm to extend a $110 million borrowing after missing a payment on a separate facility about a week ago.

The firm wanted an extra three years to repay the loan, which is backed by a life sciences park project in Shanghai, but some lenders were pushing for an 18-month extension instead, the sources added.

While many bankers involved in the talks expected a deal to be reached, the last-minute wrangling underscores the difficulties inherent in such deals. China’s real estate crisis has increased the risk of default on real estate-related loans, prompting lenders to be cautious about expanding their exposure to the sector. This made it difficult for borrowers to refinance maturing debt.

Just this month, a Gaw-managed fund missed payment on a separate $260 million loan tied to an office tower in Shanghai; This means banks can declare default on the facility. One of the lenders, Taiwan’s Hua Nan Commercial Bank Ltd., has requested immediate repayment of the loan, but any implementation would require majority approval, the sources said.

Gaw declined to comment. Hua Nan had no comment when reached by Bloomberg News on Monday.

Alongside Gaw, Hong Kong developer Parkview Group Ltd. also participated in last-minute loan negotiations for a property-backed facility. The company secured a one-month extension of a $940 million loan earlier this month, reducing the risk of default as it tries to negotiate a longer-term deal.

Separately, Gaw last week reached an agreement to refinance a loan equivalent to $207 million maturing this month, tied to four office towers in Shanghai.

Sometimes protracted refinancing talks highlight challenges in China’s commercial real estate sector. For example, grade A office market rents in Shanghai fell further in the third quarter, dropping 4.1% from the previous three months, according to Knight Frank.

Real estate consultancies and economists think it will take years for the country’s commercial building oversupply to be absorbed.

This article was generated from an automated news agency feed without modifications to the text.