The West Kowloon Cultural District Authority has today terminated the employment under the contract for the M+ construction project with Hsin Chong Construction Company Limited (HCC). The contract included work on the M+ Building, the Conservation and Storage Building, a retail, dining and entertainment building (P39B) which will serve as the Authority’s future headquarters; an interfacing car park; and some related Public Infrastructure Works. The total contract value was HK$5.9 billion.
The decision to terminate the contract has been forced upon the Authority due to the insolvency of HCC which has been caused by the severe financial troubles facing its parent company, Hsin Chong Group Holdings Limited (HCG). In addition, the poor management performance of HCC has led to significant delays in the work on site, for which the Authority has not received substantiated claims for extension of time.
This has been a very difficult decision for the Authority to make but one which has been taken in the best interests of the M+ construction project.
The Authority has been aware of the difficult financial position facing HCC and its parent company, HCG since late 2016. The Board has been kept fully informed of the situation throughout. Direct payments to subcontractors was successful in moving the M+ construction project forward. It also ensured stable employment and payment of wages for over 1,600 workers on the site.
Following termination of HCC’s employment under the contract, the Authority has taken action to secure the site.
The Authority has initiated discussion with subcontractors. The Authority intends to use best endeavours to secure all the current subcontracts for the M+ construction project by way of novation.
The Authority will now urgently carry out a restricted tender to secure a management contractor to take over the M+ construction project and to see it through to completion. We anticipate that this will take about six to eight weeks to arrange. In the meantime, the site will be closed down and only essential maintenance and safety management will be carried out. Access to the site will be restricted.
Government has been kept fully informed of the situation and the necessary statutory and other requirements will be observed.
* Where there is any discrepancy between the English and Chinese press statement, the English version should prevail.
Chronology of the development of the financial position of Hsin Chong Construction Company Limited (HCC) with respect to the M+ project in the public domain:
- 26 Sep 2015 – The M+ Main Works Contract (CC/2015/3A/022) was signed with HCC;
- 28 Sep 2016 – Anonymous Analytics article about HCC’s parent company Hsin Chong Group Holdings Limited (HCG) facing financial difficulties was published online;
- 3 April 2017 – trading of the ordinary shares and debt securities of HCG was suspended;
- 18 May 2018 – HCG announced its failure to repay US$300 million in bonds due on 18 May 2018. This also triggers the possibility of default on a further US$150 million in bonds due in 2019. HCG also announced that it was in discussions with its lenders to manage its overdue debt and failure to repay the US dollar bonds. HCG together with HCC (as a guarantor of the bonds) is in default on the bonds and other financial facilities.