Nan Hai says creditors are freezing its assets as it comes up short to meet US$350 million of notes due this weekend

The company said it “has not been able to meet part of the financial obligations” for its US$350 million, 2.9 per cent credit-enhanced notes due on June 11
That has led to “certain creditors initiating enforcement actions,” according to a statement to the Hong Kong stock exchange

China property

Sandy Li

Published: 1:30pm, 7 Jun 2022

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Nan Hai Corporation said creditors are freezing some of its assets because of the developer’s failure to meet the financial obligations on a dollar-denominated note due this weekend.

The company, owned by the HK01 news portal’s founder Yu Pun-hoi, said it “has not been able to meet part of the financial obligations” for its US$350 million, 2.9 per cent credit-enhanced notes due on June 11, which led to “certain creditors initiating enforcement actions,” according to a statement to the Hong Kong stock exchange.

“This has led to part of [Nan Hai’s] assets being subject to legal process to freeze” the assets used as collateral, said Nan Hai’s executive director Liu Rong, in the exchange filing.

The action underscores how the finances of Nan Hai have fallen victim to the Covid-19 pandemic and China’s property crackdown. Unaudited revenue from Nan Hai’s cinemas plunged more than 70 per cent in 2020 and 2021, while real estate sales fell 35 per cent in 2020, widening to a 50 per cent slump last year, said the Beijing-headquartered company.

An undated photograph of Nan Hai’s executive chairman and owner of the HK01 news portal Yu Pun-hoi. Photo: Baidu

The company recorded a loss of between HK$3 billion (US$382 million) and HK$3.4 billion in 2021 because of the weak property market and China’s protracted Covid-19 pandemic, according to Nan Hai’s profit warning in March.

“These challenges have been brought on by the Covid-19 outbreak and measures implemented to deal with such an outbreak in the mainland,” Liu said.

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Trading in Nan Hai’s shares had been halted on the Hong Kong exchange since April 1. They fell 5.4 per cent on March 31 to 3.5 Hong Kong cents.

The group will continue to actively communicate with its creditors in seeking to restructure its liabilities, Nan Hai said, adding it is not subject to any winding-up petition. The company would also find ways to sell its assets faster to improve its liquidity.

Before establishing HK01, Yu was chairman of Ming Pao Enterprise Corporation, the publisher of the eponymous Ming Pao, one of Hong Kong’s biggest Chinese-language newspapers. He quit Ming Pao’s board in 1994 amid censure by the Hong Kong stock exchange. He could not be reached to comment.

Exterior of HK01’s office in Hong Kong’s Tsuen Wan. The news portal laid off 40 employees, or 5 per cent of its overall headcount on 3 February 2021. Photo: Sam Tsang

Meanwhile, the firm has suspended its employees in the property development section of The Peninsula project in Shenzhen, asking staff to stand down for six months, part of a cost-control measure to reduce its overheads.

All employees of The Peninsula Shenzhen Property Development, a subsidiary of Nan Hai Development, and an associated company, The Peninsula Real Estate (Shenzhen) Corporation, have been suspended from work for six months from June 1, according to social media posts containing screen grabs of a letter issued by the human resources department of The Peninsula Shenzhen Property Development.

“It is believed that the group’s financial position would improve when it is able to develop Phase five of The Peninsula project,” said Liu.

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