China's Shenzhen Bank plays down Guoco loan dispute

SHANGHAI, May 20 (Reuters) - China's Shenzhen Development Bank (000001.SZ) said on Tuesday that its dispute with Malaysia's Guoco Group over repayment of 1 billion yuan ($143 million) in loans would have little impact on its business.

Shenzhen Bank said last Thursday it had reached a settlement with three companies on a lawsuit involving 1.5 billion yuan of overdue loans, with Beijing Donghua Real Estate Development Co agreeing to repay 1 billion yuan.

But Guoco disputed the legality of the deal, stating that it had already agreed to acquire Donghua and that Donghua was not subject to any loan obligations.

Guoco Group, a developer controlled by Malaysian tycoon Quek Leng Chan, said over the weekend that it had already taken over management of Donghua and had asked Chinese courts to order completion of the transfer of Donghua's ownership, which has been delayed.

Shenzhen Bank, controlled by U.S. private equity firm Newbridge Capital [NB.UL], said in a statement filed with the Shenzhen stock exchange that Guoco's dispute regarding the transfer of Donghua's ownership would not have any impact on the legality of the settlement regarding the 1.5 billion yuan in overdue loans.

It acknowledged uncertainty surrounding the settlement, however, and added: "If the settlement cannot be carried out, we will continue to take measures to recover the overdue loans and it would not have any major negative impact on our finances."

Shenzhen Bank reiterated that it had already set aside 600 million yuan as provisions for the 1.5 billion yuan in overdue loans, which were extended in 2003. (US$1=6.9778 Yuan) (Reporting by Samuel Shen; Editing by Edmund Klamann)