Hong Kong’s Sogo Department store racing to refinance loan: sources

[HONG KONG] The operator of the Sogo department stores in Hong Kong has less than a month to refinance a loan coming due, people familiar with the matter said, adding to a growing list of firms in the city pushed into last-minute negotiations in the aftermath of a property downturn.

Lifestyle International Holdings still needs to nail down about HK$2 billion (S$326.4 million) in commitments to meet its target of refinancing HK$6.75 billion outstanding on the deal, according to people, who asked not to be identified discussing private matters. Negotiations with banks have already stretched over four months.

The shortfall represents about a third of the refinancing for the loan, which is secured against the iconic Sogo department store in Hong Kong’s shopping district Causeway Bay.

The case highlights crosscurrents in Hong Kong’s economy, which expanded at its fastest pace in almost five years in the first quarter. The residential housing market has been rebounding, tourism is strengthing and share listings are surging. But lingering strains in commercial property have continued to sting borrowers.

In another recent case, Hong Kong hotel operator Asia Standard Hotel Holdings has been struggling to secure sufficient backing from lenders to refinance a HK$1.36 billion loan due in days.

There have been, however, some more encouraging signs for Lifestyle International recently.

To reduce its near-term bond repayment risk and boost lender confidence, the company’s chairman, Hong Kong tycoon Thomas Lau Luen-hung, said last month that he intends to purchase the full outstanding principal of a US$350 million bond before it matures on Jun 18.

The move has prompted some banks that were previously hesitant to rethink their participation in the loan refinancing, the people said. The company is also tapping new lenders to join the facility, they added.

The shifting dynamics of the loan talks reflect how crucial personal support from local tycoons has become when navigating challenges in the strained commercial real estate sector. Following the announcement, banks had even sought the possibility of liquidity support from the company chairman on the loan, but there has been no indication so far from the company, the people shared.

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Lifestyle International did not respond to a request for comment.

Proceeds from the new financing for Future Develop, a subsidiary of Lifestyle International, will be used to refinance the five-year loan maturing on Jun 18.

Lifestyle International was taken private in 2022 by its chairman Lau in a HK$1.9 billion deal. BLOOMBERG