RE AETHER LTD

HCCW 397/2020

[2021] HKCFI 1143

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 397 OF 2020

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D E C I S I O N

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1.  I have before me a petition to wind up the Company on the grounds of insolvency. There is no dispute that the Company is indebted to the Petitioner for in excess of US$124 million. The Petitioner is a secured creditor and has appointed receivers over amongst other things a 49% shareholding in the Company. That shareholding was beneficially owned by interests associated with Lim Yew Cheng, who has filed an affirmation in these proceedings explaining the Company’s restructuring efforts.

2.  The date for repayment of the debt has been extended twice by the Petitioner, most recently to 30 June 2020.  Self-evidently, payment was not made by that date and as a result a statutory demand was served dated 29 October 2020 and a month later the petition issued.  I understand the petition has been adjourned twice by the Master in order for the Petitioner and the Company to see whether they can agree an amicable way to resolve the current dispute.

3.  The position of the Petitioner today was to seek an immediate winding up.  The Company would like an adjournment of about three months in order to progress what it says is anticipated to be successful plans which will allow it to pay the Petitioner in full.

4.  The proposed restructuring has various components.  It is not entirely clear to what extent they are dependent upon one another.  The first is the most straightforward, which involves the taking up of a loan of US$390 million from Apollo Asia Management LLP (“Apollo”).  This loan will be sufficient to allow the Petitioner to be paid in full.  Then there are negotiations which the majority shareholder of the Company, which opposes an immediate winding up, has been progressing which involves the realisation of the Company’s interests in valuable property in Beijing.

5.  The easiest way to illustrate what those discussions involved is to quote [11] and [12] of Mr Lim’s affirmation in which he says as follows:

“11. Separately, in December 2019, ARA expressed interest in acquiring a total of 51% interest in the Company from both CBD Aether and Xeno for approximately RMB2.5 billion. ARA is a leading APAC real assets fund manager with approximately SGD116 billion in gross asset under management as at 31 December 2020. The transaction was originally targeted to complete by 31 March 2020 but did not proceed in the end due to the unexpected COVID-19 situation in early 2020, which disrupted ARA’s proposed investment plans in this regard. However, now that the COVID-19 situation has improved in mainland China, ARA has again expressed its interest in the Project. In connection with ARA’s renewed interest, on 22 March 2021, ARA sent a letter (the ‘ARA 22 March Letter’) to all of the Company’s shareholders (with the Petitioner copied) affirming its interest in the Project. In summary, ARA expressed an interest in acquiring up to 70% of the issued share capital of the Company of RMB3,432,000,000; or alternatively, acquiring the Phase 1 of the Project (i.e. the office building and the underground shopping mall) at the price of RMB3,600,000,000. There is now produced and shown to me marked ‘LYC-1’ a copy of the ARA 22 March Letter and an e-mail from ARA setting out its interest (with an English translation of the e-mail prepared by Sidley Austin). Should the acquisition proceed, it would provide sufficient monies to settle both the Guanghua Debt and the Xeno 2017 Debt and improve the Company’s financial positions. I am now in further discussion with ARA on its interest.

12.  In addition, a real estate fund under CR Capital also approached me (as well as CBD Aether) recently to express interest in acquiring in acquiring (i) up to 100% issued share capital of the Company held by CBD Aether, Kenora and Xeno; (ii) 100% equity interest in Xeno (which is at present beneficially owned by me) and (iii) 100% equity interest in Guangzhou Hunyuan which in turn holds 20% interest in the Project, at the unit price of RMB50,000 per square meter for 104,797 square meters in Beijing Aether Square.  CR Capital is an investment arm of China Resources Group, which is a Chinese state-owned entity with significant investments in Hong Kong.  CR Capital’s assets under management is reported to exceed HKD120 billion.  There are now produced and shown to me marked ‘LYC-2’ copies of the two-emails from CR Capital dated 9 April 2021 and 10 April 2021 respectively, with English translation prepared by Sidley Austin.  The preliminary proposal from CR Capital values the Project at RMB5,239,850,000 (RMB50,000 / square meter x 104,797 square meters being the size of the above-ground property area).  Based on the proposal from CR Capital, the monies advanced by CR Capital would raise more than sufficient funds for the Guanghua Debt and the Xeno 2017 to be repaid in full.”

6.  The principles by reference to which the court determines an application by a company seeking an adjournment in order to restructure its debts are well-known, I will not repeat them here [1].  It seems to me that particularly in cases of this sort, it is necessary for the court to consider the adjournment application by reference to at least some reasonably precise timeline based on the proposals which the Company seems most confident are likely to prove successful and which there is reason to think would result in an arrangement which is more beneficial to creditors than an immediate winding up order.

7.  As I have already mentioned, in the present case I have been told that the opposing contributory is confident that it will prove possible to raise substantial finance from Apollo, which will be enough to pay the Petitioner in full.

8.  Mr Lim has also deposed to his expectation, which I assume is based on his familiarity with the matter and is genuine, negotiations being concluded in order that a drawdown should be possible by the end of May of this year.  It seems to me that this is sufficiently precise and the timeline suggested by Mr Lim sufficiently close to the current date to justify the court exercising its discretion to adjourn the petition in order to allow the Company the opportunity to settle the Petitioner’s debt out of the money to be drawn down if the loan is concluded.  I am not satisfied that the rather vaguer proposal relating to the realisation of the value of its interest in property in Beijing is.  I will, therefore, tie the adjournment closely to the success of the loan.  It is for this reason that I have adjourned the petition until 7 June 2021.  If the loan has not been concluded by the time the petition is brought on before me, the Company should expect to be wound up unless it is able to produce a rather more compelling story demonstrating its ability to restructure its debt by realising its interests in the Beijing property than it has been done in the evidence currently before me.

9.  I will give the Company leave to file further evidence by 10am on 28 May 2021 and the Petitioner leave to file evidence in reply by 4:30pm on 2 June 2021.