New World Development offers to buy back US$600 million of bonds after completing a US$2.8 billion asset sale to controlling family
- New World offers to buy back up to US$600 million of its dollar-denominated bonds by Dutch auction in effort to manage debt load
- Developer this week completed the sale of its entire stake in NWS Holdings to its controlling family for HK$21.8 billion (US$2.8 billion)
The cash offer will be based on a modified Dutch auction, meaning the developer will accept lowest prices first until the maximum buyback amount is reached. The offer closes on December 1 with results expected on December 4, barring any extension. The firm may choose not to accept any of the offer tendered by bondholders, it added.
“The rationale is to optimise the cost of capital and debt profile,” chairman Henry Cheng Kar-shun said in the exchange filing. “The offer also provides liquidity to investors at premium to market price.”
Goldman Sachs, HSBC, Mizuho Securities and UBS have been appointed as dealer managers, while Orient Securities will be co-dealer manager.
“The buyback is a positive catalyst to support bond prices and refinancing its maturing bonds,” said Tommy Kung, an analyst at KGI Asia. Still, the plan would have a “limited impact” on its financial position, as the buy-back amount is small relative to US$24.3 billion of its interest-bearing debt, he added.
New World denies sale of K11 Atelier stake, citing ‘robust cash reserves’
New World, controlled by Hong Kong’s third-richest billionaire family led by the 76-year old Cheng, has been looking to cut its debts as sliding home prices and higher borrowing costs pressured its finances. The developer this week completed the sale of its 60.9 per cent stake in NWS Holdings to a family-owned entity for HK$21.8 billion.
The Group had HK$54.5 billion of cash on June 30 and consolidated net debt of HK$130.8 billion, or a gearing ratio of 48.7 per cent, according to its latest financial report, an increase from 43.2 per cent a year earlier. It had HK$14.7 billion of loans due within 12 months.
Concerns about the group’s debt burden, which is among the highest for Hong Kong developers, have weighed on its stock price and slashed its market value by 76 per cent from the peak in 2019. Its shares slipped 4.4 per cent to HK$13.32 in Hong Kong trading on Thursday, bringing the losses this year to 40 percent.
In the public tender, New World offered to pay 76 cents to 90 cents on the dollar for the five straight bonds, versus their indicative market prices of 72 to 87 cents, according to Bloomberg data. It offered 60 and 87.5 cents on the dollar for the perpetual notes, versus their market levels of 57 cents and 84 cents, respectively.
