New World closes record US$11.2 billion loan refinancing deal

[HONG KONG] Distressed Hong Kong builder New World Development has closed a US$11.2 billion loan refinancing deal, formally concluding months of negotiations with banks for the largest-ever such borrowing in the city. 

The company successfully refinanced certain of its existing offshore unsecured financial indebtedness, including bank loans, through a new refinancing term loan facility, it said in a filing to the Hong Kong stock exchange on Monday (Jun 30). The developer also said it aligned its other existing offshore unsecured bank loans with the terms of the new refinancing loan.

The deal was all but done after the cash-strapped builder last week secured written commitments from all participating banks, with only procedural steps having remained for lenders to sign the loan documents, Bloomberg News reported at the time. 

The transaction offers a much-needed reprieve for New World, which has been working hard to preserve liquidity and stabilise its finances. Documentation shows that if the company hadn’t achieved a 100 per cent approval by June 30, the refinancing could have fallen through as any collateral pledged would be released and bank commitments cancelled.

The new bank facility consists of multiple tranches of bank loans with different maturities, with the earliest maturity date being 30 June 2028, and include financial covenants and security interests granted over certain of the group’s assets, which allow the group more flexibility to better manage its expected ongoing business and financial needs, the filing says.

New World, controlled by the family empire of Hong Kong tycoon Henry Cheng, has encountered significant challenges amid the prolonged property downturn in Hong Kong and mainland China. Concerns grew among investors regarding the firm’s ability to manage its debt, particularly after the builder decided to delay coupon payments on four perpetual notes, which led to a bond selloff. BLOOMBERG