Dasin Retail Trust Faces Major Governance Breach in PRC Subsidiaries

Key Points from the Report

• Dasin Retail Trust Management Pte. Ltd. (“DRTM”) has issued an important update regarding severe breaches in its PRC subsidiaries relating to unauthorised repayments of onshore loans.
• The unauthorised actions are in contravention of the Intercreditor Deed (ICD) dated 17 January 2017, which governs the relationship between onshore and offshore lenders for loan facilities totaling up to S\$430 million (offshore) and RMB400 million (onshore).
• Zhongshan Yuanxin Commercial Property Management Co Ltd (Onshore Borrower) has attempted to make full repayment of onshore liabilities ahead of offshore liabilities, and requested release of security and guarantees – both direct breaches of the ICD.
• The Onshore Borrower has also filed a complaint with regulatory authorities regarding the repayment, further escalating the situation.
• The IPO Offshore Facility Agent has formally requested the onshore agent to refrain from accepting any further repayments or releasing securities tied to the onshore liabilities.
• Losses and damages have already occurred to Offshore Finance Parties from these actions, with further risk if breaches continue.
• The legal representative of the Onshore Borrower is Zhang Zhongming (ZZM), nephew of Zhang Zhencheng (ZZC), a conflicted director who did not review this announcement.
• The majority of Dasin Retail Trust’s Board explicitly states these are severe breaches of internal controls and contractual obligations, putting DRT’s assets at significant risk and prejudicing restructuring efforts.

Investor-Relevant Details and Potential Price-Sensitive Implications

• Severe breach of controls and contractual obligations: The actions taken by the PRC subsidiaries are described as “severe breaches” and are likely to undermine confidence in DRT’s governance and risk management.
• Jeopardizing restructuring efforts: The breaches reportedly put DRT’s assets at significant risk and may derail ongoing restructuring, which could have direct repercussions on asset values and future distributions to unitholders.
• Regulatory escalation: The Onshore Borrower’s complaint to regulatory authorities introduces further risk and uncertainty, potentially inviting regulatory scrutiny or sanctions.
• Conflict of interest at Board level: The announcement highlights that a key director, ZZC, is conflicted due to familial ties with the Onshore Borrower’s legal representative. This could raise questions of governance and accountability at the highest level.
• Potential for further financial loss: The Offshore Finance Parties have already suffered loss and damage, with more possible if unauthorized repayments and security releases continue.
• Reservation of rights: The Offshore Facility Agent and Offshore Finance Parties have expressly reserved all rights, indicating possible legal or remedial action ahead.
• Market disclosure: The Trustee-Manager has committed to further announcements if material developments arise, which could introduce additional volatility or uncertainty for unitholders.

Summary and Outlook

Dasin Retail Trust is currently grappling with a serious breach of governance and contract within its PRC subsidiaries, stemming from unauthorized repayment of onshore loans and the attempted release of related securities. These actions directly violate the Intercreditor Deed that underpins the trust’s financing structure and have already resulted in loss and damage to offshore financiers. The escalation to regulatory authorities and the existence of board-level conflicts compound the situation, threatening both the value of DRT’s assets and its ongoing restructuring.

The severity of these breaches, and their potential impact on the financial health and governance of Dasin Retail Trust, represent highly price-sensitive information. Investors should closely monitor subsequent disclosures and consider the heightened risks to asset value, future distributions, and market confidence.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should undertake their own due diligence and consult their professional advisors before making any investment decisions related to Dasin Retail Trust. The situation described may evolve, and further material disclosures may be made by the company.

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