New World offer raises $3.2b as stock nears six-year high

Rumours suggest share issue designed to dilute stake of hedge fund whose buying has fuelled price rally

New World Development has taken advantage of a high share price to raise $3.22 billion from a placement of new shares to independent investors. About half of the amount raised will be used to repay loans.

The placement follows a 41 per cent rise in the firm's share price in the past five weeks to an almost six-year high on the back of buying from a British hedge fund. The gains accelerated last week as investors bought the stock in the hope the fund would further boost its stake and add upward pressure to the price.

New World sold 280 million shares at $11.50 each, a 10.85 per cent discount on Friday's closing price of $12.90, according to a company statement. However, the discount to the five-day closing average was no more than 2.2 per cent.

The shares are up 53.2 per cent in the year to date but were suspended from trading yesterday pending details of the placement.

About $1.5 billion of the proceeds will go towards repaying bank loans while the remainder will be used as general working capital. On June 30, the firm had long-term borrowings of about $14.7 billion, a debt-equity ratio of 23.8 per cent.

Rumours had it that the shares were sold to New World chairman Cheng Yu-tung through his firm Chow Tai Fook, but sources last night said this was not true.