Hong Kong developer Emperor International Holdings’ inability to repay HK$16.6 billion (US$2.1 billion) in loans highlights a growing debt crisis among small and medium-sized developers in the city, prompting analysts to warn of more defaults.
“High debt ratios have become a mainstream condition among Hong Kong developers, particularly mid-sized developers” amid dropping valuations, low demand, high vacancy rates, falling rental income and high interest rates, said Glen Ho, national turnaround and restructuring leader at consulting company Deloitte.
“Bank borrowings with carrying amounts of HK$16.6 billion in aggregate have become overdue and/or the group has breached certain terms of the loan agreements,” Emperor said on Friday in its annual results for the year ended March 31.
“Banks may request immediate repayment of these bank borrowings,” it said, adding that the borrowings had been classified as current liabilities as of March 31.
Emperor International is controlled by entertainment mogul Albert Yeung Sau-shing, one of Hong Kong’s richest tycoons and the force behind the city’s biggest Cantopop stars, including Joey Yung Cho-yee, Leo Ku Kui-kei, and Nicholas Tse Ting-fung.
Meanwhile, the group had pledged assets with a carrying value of HK$31.19 billion as security for banking facilities, according to its annual report.