Willy Uy: Growing in the Provinces

What are the main areas of focus for Shui On Land's in-house team?

We offer all-round legal services to our internal clients. Our international team is responsible for capital markets, securities and financing work, while our local team is responsible for all legal work relating to our daily operations and business. Being a company listed in Hong Kong, our compliance and company secretarial teams also play an important role in observing Hong Kong listing rules and in corporate governance.

To what extent do you outsource work and to which law firms?

We have a big team and can handle the majority of legal work in-house. However, to protect shareholders' interests we will get external legal involvement in major deals and transactions. We have a panel list of law firms and will assign work to them based on their expertise.

The company has property developments in locations such as Chongqing and Hangzhou. What has been your experience of private law firms in these jurisdictions?

Local law firms have the advantage of having local contacts and knowledge of local regulations and practices. However, their services will thus be restricted to local issues. Also, our general impression is that local law firms are not as innovative as law firms in big cities like Beijing and Shanghai.

What impact has the financial crisis had on the legal function at Shui On Land?

The financial crisis has certainly added more workload to the legal department. It has taken more time to conclude major transactions, as partners, investors and banks are more cautious than before. There were also transactions that did not materialise. For the local teams, they had to spend more time dealing with disputes as purchasers and tenants are generally more difficult to deal with in difficult times.

The company closed its US$210 million syndicated loan financing and security arrangements – which were used to refinance its outstanding high-yield bonds – in October last year just as Lehman Brothers collapsed. What unforeseen challenges occurred as a result of the turmoil in financial markets?

It was certainly a difficult time during the last quarter of 2008. The financial turmoil has affected some of our deals – especially on timing – which became prolonged as a result.

Can you briefly elaborate on the complexity of the loan, which I understand required the negotiation of complex intercreditor arrangements between lenders, existing creditors and certain joint venture partners?

Without disclosing too much detail of the deal, the major difficulty was how to make each party happy, bearing in mind it was a time of great uncertainty. Different parties had different agendas and interests, but also everyone was trying to protect themselves. In particular there were a few banks involved, and each bank had its own internal policy and requirements. We are pleased that the loan was closed, and we have to thank the banks who have always been supportive to the company.

The group has since signed a letter of intent for a Rmb13 billion (US$1.9 billion) three-year loan facility from the Agricultural Bank of China to take advantage of a revival in the market. How do you see the property sector in China performing over the next 12 months?

I believe property companies are optimistic about the property sector in China over the next 12 months. In particular, everyone is anticipating that the EXPO will help nurture a better market sentiment. With the gradual recovery of the US economy, China should be quick enough to pick up on the next round of growth.