Debt deal ends Century City saga

Joseph Lo

Property developer and hotelier puts the Asian financial crisis behind it after securing a $1.79b restructuring agreement

Developer and hotelier Lo Yuk-sui's Century City International Holdings has agreed to a $1.79 billion debt-restructuring programme with creditors, ending a turbulent chapter in the history of Hong Kong business.

Century City is the last of Hong Kong's high-profile property developers to successfully rehabilitate its balance sheet after the Asian financial crisis of 1997, which left many firms with crippling debts and shattered prospects in the wake of the city's collapsed property market.

At the height of Mr Lo's financial problems, his companies - including Century City, Paliburg Holdings and Regal Hotels International - struggled with about $14.8 billion in debt.

In 1998, the three companies announced combined losses of $9.98 billion, at the time the biggest loss ever announced by a publicly listed group in the city.

The restructuring deal announced yesterday left Mr Lo almost debt-free and able to focus on returning his company to its pre-1997 stature.

'It's like a great weight has been lifted off my shoulders and we are able to breathe again,' Mr Lo said yesterday.

Century City said in a statement yesterday that it had secured the agreement of all creditors to accept a restructuring that settled its entire $1.55 billion balance of debts through the issuance of non-voting preference shares of about $1.38 billion, each convertible into ordinary shares at a one-to-one ratio over the next five years.

The remainder of the debt will be settled with $79 million raised through secured bilateral loans guaranteed by Mr Lo and secured by Paliburg shares, $14 million in notes exchangeable into ordinary Paliburg shares and a further $74.5 million in existing Paliburg shares held by Century City.

There are three classes of preference shares: 4.22 billion A shares redeemable by Century City over the next year at 20 cents each, 280 million B shares redeemable within two years at 17.5 cents each, and 3.25 billion C shares redeemable within five years at 15 cents per share.

Under the plan, creditors holding A shares have the option of selling back 25 per cent of their holding to Century City at one cent per share but must make an irrevocable notice to that effect by today.

On September 30, the date that the restructuring programme was agreed on and the firm's shares last traded, Century City stock stood at 10.9 cents.

The restructuring plan was almost two years in the making.

Mr Lo said the deal was complex because there were 'so many creditors, each with a different agenda to follow and different requirements'.

'We've finally managed to get all of them to agree ... [because] with the structure of this plan, it allows them to create a deal that works for each bank,' he said.

The debt woes of another victim of the property market collapse, Lai Sun Development, have also come to an end. Last week, bondholders approved a proposal to restructure its debts. That plan is expected to return Lai Sun to a positive net-asset value, leaving it with a more manageable debt load of $2 billion to $3 billion.

Mr Lo said that given the completion of his group's restructuring plans, he now looked forward to rebuilding his corporate empire.

'We've learned a lot since 1997 and have a lot more experience in how to expand our company in a more prudent way,' he said.