Road King to become first Hong Kong developer to default on bond as pressure mounts
The failure to make payment by Road King, totalling $11.3 million, is set to be the first bond default by a Hong Kong builder since China's property crisis began in 2021, deepening contagion risks for the Chinese-controlled territory.
Road King, a small-sized developer which earns the majority of its revenues from mainland China, said in an announcement on Friday that it had not made payment on the July 12 due date for its 2029 bond, but it had a grace period, which expired on Tuesday.
Clients holding the bond in question have not received payment, according to investment platform FSMOne.
The company did not respond to requests for comment.
Mainland China and Hong Kong property markets have been under pressure in the past few years with plunging sales and tightening liquidity. On the mainland in particular, many companies have defaulted despite repeated government attempts to revive weak consumer demand.
Holding an outstanding $2.3 billion in senior notes, Road King in June proposed to restructure the debt for the second time in a row. It sought amendments to its senior notes including interest payments due before 2027 to be made in payment-in-kind, and proposed waiving any default.
However, the proposals have not received enough support from bondholders to pass.
A year ago, bondholders approved the firm's offer of $60 million to buy back at discount its six senior notes due between 2024 and 2026, and solicited consent to extend the maturity of each bond and the interest rate reset date for its perpetual bond by 3.5 years.
"We expect to continue to face debt repayment and liquidity pressures in the future as the market recovery has been slower than expected," it said in a filing in June.
"We continue to face headwinds, including a continuing downturn in China's real estate market, liquidity constraints onshore and inability to remit cash offshore for debt service and a continued price cutting situation in Hong Kong's real estate market."
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