New World Development (NWD) is selling US$364 million in bonds as part of a cash-raising programme to strengthen the group's financial position. The company is launching a five-year, US$300 million convertible bond and also selling HK$500 million of one-year Hong Kong dollar-denominated straight bonds to make up the total. NWD raised HK$2.34 billion from a share placement in January. Analysts said that NWD would be in a better position to manage the planned spin-off of its mainland property business. Improved cash flow would give it more time and flexibility for the separate listing of New World China, they said. It would ensure the company was not forced to list the division at a big discount to net asset value. NWD was suspended from trading yesterday afternoon ahead of the bond-issue announcement. It closed the morning session at $21.90. Peter Burnett, head of equities capital market at bonds arranger Warburg Dillon Read, said the bonds had a five-year maturity with a coupon rate of 2.75 per cent to 3.25 per cent. Mr Burnett said the conversion price would be at a 12-18 per cent premium to its last traded share price. Exact pricing would depend on the response. On conversion, the shares will represent 4.5 per cent of NWD's expanded issued share capital. Mr Burnett said the proceeds from the bond issue would be used for NWD's general working capital. Warburg had started offering the bonds in Europe and the United States and there had been an encouraging response, reflecting investor confidence in the Hong Kong property market. He said NWD was attractive as it was trading at a 30 per cent discount to its net asset value. Analysts said the bond issue would strengthen NWD's financial position. At the end of March, NWD formally applied to the Hong Kong stock exchange to spin off the mainland property unit in a move that aims to raise more than HK$3 billion. The flotation is planned to reduce high gearing. NWD's current net debt to equity ratio is 49.11 per cent. New World China Land issued US$350 million in mandatory convertible bonds in 1996, which, before they mature in December this year, can be converted into shares in the unit in an initial public offer. If the shares are not listed before the bonds mature, NWD must pay US$350 million to redeem them. Analysts said even if the group delayed its plans to spin off New World China, NWD still would have sufficient capital to redeem the bonds.