(Yicai Global) Feb. 22 -- Dafa Properties has become the first mainland Chinese property developer listed in Hong Kong to be slapped with a winding up petition from creditors that could see the company forced into liquidation in order to pay off debts.

A number of creditors have filed a winding-up petition, which is a final demand notice with the intention of forcing payment, against Dafa and a subsidiary to the Hong Kong High Court concerning USD150 billion of outstanding senior notes, the Shanghai-based developer said yesterday.

Dafa, which is a small-scale property developer with sales of CNY37.6 billion (USD595 billion) last year, intends to oppose the petition, it said. There will not be any seizing of the company’s assets until the court issues a liquidation order, it added.

The dispute likely arises from a USD194.5 million debt that was due last month with a coupon rate of 9.95 percent. Before the notes matured, Dafa said that it had been in negotiations with the majority of creditors to extend the due date to June 30 and increase the interest rate to 12.5 percent. Those lenders who have submitted the petition are apparently those who disagreed with the debt extension.

“USD150 million is a relatively small amount and is unlikely to trigger a forced closure,” an industry insider told Yicai Global. “However, it will put more pressure on Dafa to service its debts.”

Dafa, which has yet to default, has also recently seen some senior management changes. Last month, the company’s Chief Executive Officer Liao Lujiang, who served in the post for four years, resigned and was replaced by Chief Operating Officer Leng Junfeng.

Dafa’s share price [HKG:6111] was trading up 0.26 percent at HKD3.86 (USD0.50) as of 12 p.m. China time today. The stock has lost 43 percent of its value since September last year.

Editor: Kim Taylor