Hong Kong property developer New World proposes US$3.2 billion rights issue

[BEIJING] Hong Kong property developer New World Development said on Sunday (Nov 15) that its board has proposed a recapitalisation plan aimed at raising about HK$24.9 billion (US$3.2 billion), according to a company filing.

New World has been trying to cut debt, dispose of assets and bolster liquidity amid tight credit conditions and a weak property market.

The plan offers shareholders 11 new shares for every existing share at HK$0.90 apiece. The company plans to use the proceeds to prepay 10 per cent of about HK$82 billion in bank loans and extend the maturity of the remaining 90 per cent by two years.

The move comes after Bain Capital decided against investing in the indebted property company. Bain had been exploring a potential investment but turned away after failing to agree on terms, people familiar with the situation said earlier, without elaborating.

The rights issue is part of the distressed developer’s broader effort to shore up liquidity after reporting a record US$3.6 billion loss for the fiscal year. It is also the first concrete sign of support from the family behind New World, which had previously indicated it was willing to back the debt-laden company.

Controlling shareholder Chow Tai Fook, which owns about 45.3 per cent of the company, has committed to take up its full entitlement, while the remaining shares will be fully underwritten.

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Chow Tai Fook has been seeking about HK$5 billion in fresh funding from banks, people familiar with the matter said this month, a move that would provide some added liquidity for any potential broad recapitalisation of New World.

To extend its maturities, the company announced an exchange offer and cancelled US$199.28 million of its bonds due in 2027 and 2028, below its overall target. New World’s total debt was about HK$143 billion at the end of June, according to its latest results announcement. A portion of that debt is due in 2028. REUTERS, BLOOMBERG