Shipbuilder Belonging to Glorious Property Boss Defers Bond Payments

Glorious Property Zhang Zhirong

Former Glorious chairman Zhang Zhirong in happier times

A Chinese shipbuilder belonging to the same group of companies as troubled developer Glorious Property Holdings Ltd (HKG:0845) has asked bondholders not to demand their money back, as it struggles to restructure its finances.

Rongsheng Heavy Industries, which was founded by former Glorious chairman Zhang Zhirong announced a RMB 8.9 billion ($1.4 billion) annual net loss on Monday, but said it had reached an agreement with 10 Chinese banks to extend repayments on more than RMB 10 billion in debt, according to a report in the Financial Times.

Glorious Already Among China’s Most Unwanted

Glorious, whose shares have slid in recent months in parallel with the struggles of Rongsheng, was singled out in early March by credit agency Moody’s, which cited the developer as being among one of the industry firms having the greatest risk in case of further credit tightening.

Zhang, who still owns 68.4 percent of Glorious, stepped down from leadership roles with both the developer and the shipbuilder that he founded, after a company he controls paid $14.2 million to settle a US insider trading case in 2012.

Zhang, who founded Rongsheng in 2005, was said in the announcement to the Hong Kong Stock Exchange to have agreed to provide the company with an unsecured, interest-free loan of up to RMB 3 billion. An offer by Zhang to buy back his similarly troubled real estate firm was rejected by Glorious in January.

Pleading with Bondholders as Shipbuilder Struggles to Stay Afloat

As the Shanghai-based shipbuilder struggled to buy time to right itself, it sold a total of HK$2.4 billion in convertible bonds to offshore investors in August 2013, and January 2014.

Now the company is asking these lenders for some time off.

In its Monday statement to the Hong Kong exchange, Rongsheng said its ability “to continue as a going concern” would depend in part on requesting “convertible bondholders not to exercise their redemption options.” The company indicated that investors could demand their principal back later, after shares in the company had slid lower.

The company has said that it plans to issue another HK$1 billion convertible bond in April.

Shares in Glorious (HKG:0845) slid 1.87 percent this week to HK$1.05 per share following Rongsheng’s announcement.

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