Troubles mount for 80-year-old builder Hsin Chong – defaults on US$150 million bond, files for provisional liquidation and faces delisting
- Hsin Chong, the construction company that built Ocean Park and Kai Tak Airport, has been granted permission by the Supreme Court of Bermuda to file for provisional liquidation
- It will be delisted in July unless it reaches a deal with potential white knights including Greenland, Kaisa Group or Poly Property
Hsin Chong Group Holdings, the Hong Kong construction major behind the iconic Ocean Park and former Kai Tak Airport, could be delisted in July after filing for provisional liquidation earlier this week.
The development came just before the company defaulted on a US$150 million bond due on Tuesday.
The Supreme Court of Bermuda approved Hsin Chong’s application to go into provisional liquidation. Edmund Yeung Lui-ming and Glen Ho Kwok-leung of Deloitte Touche Tohmatsu Hong Kong, and Rachelle Ann Frisby, of Deloitte in Bermuda have been named joint provisional liquidators, the company said in a filing to the Hong Kong stock exchange on Monday.
The company, whose shares have been suspended from trading for 21 months, will be delisted on July 31 if it is unable to resolve its issues by then. The stock exchange last August introduced a new rule to delist a company that has been suspended for 18 months, or 12 months in the case of a company that had been suspended before the rule was introduced.
The 80-year-old company, chaired by Guangdong businessman Lin Zhuoyan, has previously been in talks with several potential white knights including Greenland Holdings, 46.4 per cent owned by the Shanghai government, the Post reported in September, quoting two anonymous sources.
Hsin Chong and Greenland could not be reached for comment on Wednesday.
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Hsin Chong has previously also been in talks with Hong Kong-listed property companies Poly Property Group and Kaisa Group Holdings for potential partnership, according to exchange filings from last May.
“Hsin Chong is still in discussions with these potential white knights,” a source close to Hsin Chong told the South China Morning Post. “The company is hoping to be able to reach a deal with one of them to restructure its debts. This is why the company applied for provisional liquidation to safeguard its assets and prevent creditors from taking it.”
The source said that Hsin Chong’s problem arose after its rapid expansion on the mainland over the past few years. “It still has thousands of staff, talented engineers and contractors with experience in complex construction projects. If the white knight can inject new capital, it can help the company get back on track.”
Hsin Chong has faced many lawsuits from different creditors for non-repayment of loans, with the latest default taking place on its 8.5 per cent, US$150 million senior notes.
The company has met certain holders of the notes and their advisers to discuss a potential “consensual restructuring” of the debt, Hsin Chong said in Tuesday’s filing.
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It anticipates continuing this dialogue and holders of the notes are invited to contact the company, Hsin Chong added.
Senior notes are debt that take priority over other unsecured or otherwise more junior debt owed by the issuer.
The construction company, founded by the Yeh family during the early years of the second world war, has been involved in building many of the city’s most iconic landmarks as well as the first large scale private housing estate Mei Foo Sun Chuen located in Lai Chi Kok, Kowloon.
In recent years, it turned to building hotels in Macau, including the Sands, the Venetian, Four Seasons, Sands Cotai Central and the Parisian.
The Yeh family ceded control of Hsin Chong to the Mission Hills Group in 2007 and later to Lin Zhuoyan.
Since then the company has taken on more projects in mainland China, including HK$10.6 billion (US$1.35 billion) of real estate at the Sanshui district in Foshan city.
A source close to Hsin Chong said these projects have dried up the company’s liquidity and led it to pile on debt.
Last August, the West Kowloon Cultural District Authority cancelled Hsin Chong’s HK$5.9 billion contract for the M+ museum project, amid concerns over the developer’s financial solvency.
Hsin Chong last traded at 35 HK cents before its suspension on April 3, 2017, giving it a market cap of HK$1.99 billion.
