(Bloomberg) — A unit of Agricultural Bank of China Ltd. is taking its legal challenge against defaulted Chinese builder Shimao Group Holdings Ltd. to Hong Kong as it seeks to recover about 1 billion yuan ($140 million) in unpaid debt.

The state-owned bank filed the lawsuit in the city after it was unable to collect money awarded to it by a court in mainland China, according to court documents seen by Bloomberg News. 

The move underscores the challenges creditors — even state-owned banks — face when trying to recover funds from troubled property developers. The sector has shown few signs of recovery after a yearslong slump marked by a string of defaults. 

Shimao, once one of the largest developers by contracted sales in China, was listed as the defendant in two lawsuits filed by a local branch of Agricultural Bank of China in Hefei, Anhui province, in August.

The lawsuit is focused on two separate loans secured by two of Shimao’s units in Hefei in 2019 and 2020 and guaranteed by Hong Kong-listed Shimao Group and some of its other arms.

A mainland court in 2022 ordered Shimao and some of its units to repay the outstanding debt, totaling 999 million yuan, as well as interest and other costs. So far they haven’t done so, according to the documents.

Agricultural Bank of China and Shimao Group didn’t respond to requests for comment.

Shimao, which was once an investment-grade company, first defaulted on offshore debt in July 2022. China Construction Bank (Asia) Corp., another state-backed bank, filed a liquidation petition against Shimao in Hong Kong last year, but the case was dismissed after the builder made progress on its $11.5 billion offshore restructuring. 

–With assistance from Emma Dong and Zheng Li.

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