Leading Hong Kong-listed construction company Hsin Chong Group Holdings has now defaulted on its two US dollar bonds totalling $450 million.
Hsin Chong was due to redeem its $150 million 8.5% senior notes on January 22, but it has not paid the amount outstanding. “The company recently met with certain holders of the notes and their advisors to discuss a potential consensual restructuring of the notes. The company anticipates continuing this dialogue,” it said.
Hsin Chong's creditor and shareholder, VMS Investment Group, has filed a petition to wind up the company. It will be heard by the Bermuda Supreme Court on February 15. Elsewhere, another creditor, Hong Kong-listed Synergis Holdings, has also delivered a petition to the Court of First Instance in Hong Kong to wind up Hsin Chong.
Edmund Yeung Lui Ming and Glen Ho Kwok Leung, both Hong Kong-based executives of Deloitte Touche Tohmatsu, have been appointed provisional liquidators of Hsin Chong by the Bermuda Supreme Court.
In the second half of May last year, Hsin Chong defaulted on its $300 million 8.75% senior notes. “The payment default has also resulted in cross-defaults under certain of the loan agreements to which the company and/or its subsidiaries are party,” the company admitted.
Then in August, Hong Kong’s West Kowloon Cultural District Authority terminated a HK$5.9 billion ($750 million) contract with its subsidiary, Hsin Chong Construction, for the M+ visual culture museum, due to its alleged insolvency. The authority cited “severe financial troubles” with Hsin Chong Group Holdings. Given M+ museum's location near Hong Kong’s high-speed train station, the cancellation of such a prestigious project was a blow to the group's reputation.
Established in 1939, Hsin Chong Group Holdings has been involved in many construction projects in Hong Kong, including railways, commercial buildings, hospitals and hotels. In Macau, it helped build several casino hotel resorts including the Parisian and the Galaxy Resort and Casino. Hsin Chong also contributed to the construction of a light rail for Muslim pilgrims in the holy Muslim city of Makkah in Saudi Arabia.
“The group’s financial situation has been restraining its ability to obtain new projects since the beginning of the year [2018], which resulted in a decrease of the construction business’ turnover,” said Hsin Chong’s 2018 interim report.
In turn, this has reduced the group's cashflow and increased its financing costs, the report added.
Hsin Chong’s net gearing ratio rose to 134% in the middle of 2018 from 114% at the end of the previous year. During the first half of 2018, the company’s revenue fell 29% to HK$2.45 billion, while it incurred a net loss of HK$705 million.
Hsin Chong’s shares have been suspended since April 2017. And a resumption of trading could bring its own problems. China Singyes Solar Technologies, another Hong Kong-listed company, defaulted on its $160 million bonds last October. When the solar panel manufacturer’s shares resumed trading on January 23, its share price plunged 48.4% to HK$1.11.
