(Yicai) Sept. 30 -- Shares of debt-laden China Fortune Land Development gave back some of their gains following a two-day rally after the Chinese property developer unveiled details of a restructuring deal that will bring in a new controlling shareholder linked to an artificial intelligence computing-power company.

CFLD [SHA: 600340] closed 5.1 percent lower at CNY1.30 (US 20 cents) today after rising over 6 percent yesterday and more than 10 percent the previous day. The shares remain 11 percent higher than before the planned controlling shareholder change was announced.

The property developer announced on Sept. 28 that Chengfeng Erjin Enterprise Management Partnership, an investment entity of cloud solution provider Chengfeng Erlai Digital Technology, and property firm Mulan Garden Real Estate signed a restructuring agreement with CFLD.

Founded in 2023 with registered capital of CNY500 million (USD74.6 million), Chengfeng Erlai mainly provides solutions related to large-model applications and AI computing power.

Under the agreement, Chengfeng Erjin will spend CNY1.2 billion (USD178.9 million) to acquire nearly two billion shares, while Mulan Real Estate will pay CNY600,000 (USD89,500) for one million shares. Together, the investors will hold almost 20.6 percent of CFLD after the transfers.

Chengfeng Erjin will be entitled to nominate or recommend at least six candidates for non-independent and independent director positions, with one of its nominees to serve as chairman after the restructuring. Chengfeng Erjin will become CFLD’s controlling shareholder through the restructuring investment, according to the announcement.

Heavy Debt Burden

CFLD has been struggling under a heavy debt burden. A creditor applied to a court in November last year to restructure the property developer and begin pre-restructuring proceedings, citing the company’s failure to repay debts when due and apparent inability to meet its obligations. As of Aug. 31, CFLD had about CNY28.4 billion (USD4.2 billion) in overdue debt, excluding interest.

The new partners could complement each other in some areas. Computing-power companies and property developers can create synergies in some industrial park projects, Liu Shui, director of enterprise research at the China Index Academy, told Yicai. Developers’ property resources and project development, construction, and operating capabilities can support data and intelligent computing centers, though not all existing land is suitable for such uses, Liu added.

However, the restructuring deal is not yet guaranteed to proceed. The agreement still faces risks of termination, rescission, revocation, or inability to be performed, the announcement added.

CFLD continues to face significant financial pressure. Operating revenue fell 43 percent from a year earlier to CNY1.7 billion in the first half of this year, while net loss attributable to shareholders of the company was CNY4.7 billion. As of the end of June, net assets attributable to shareholders stood at negative CNY21.8 billion.

Editor: Emmi Laine