New World parties call off talks on stake sale

PUBLISHED : Tuesday, 26 February, 2002, 12:00am
UPDATED : Tuesday, 26 February, 2002, 12:00am
 

New World Development (NWD) has discontinued talks - announced just last month - to sell its unprofitable fixed-line telephone business to majority-owned New World Infrastructure (NWI).


Mainland bridge and toll operator NWI, whose net profit last year crashed 99 per cent, had been expected to issue convertible notes and warrants to fund the acquisition, estimated to cost up to HK$2 billion.


Last night, the company did not say why it was shelving the proposal, although it had been widely expected in investment circles highly critical of the deal.


The announcement also coincided with yesterday's move by ratings agency Standard & Poor's to lower NWI's corporate credit rating and that of its US$250 million convertible bond issue, due next year, to BB-plus from BBB-minus.


Parent and subsidiary had been put on credit watch since October because of NWI's deteriorating profitability and cash generation in the past few years and parent NWD's weak financial profile.


The proposed sale of wholly owned New World Telephone (NWT) to 60.6 per cent-owned NWI was seen as part of the debt-ridden parent's efforts at restructuring to improve its financial position.


NWT, the smallest network carrier among Hong Kong's four fixed-line operators, has yet to turn a profit.


However, in the past two years, the company has achieved positive cash flows.


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