New World shares, bonds jump after report on financing talks
Investors have become increasingly sceptical of the firm’s ability to manage its debt burden, particularly after it reported its first loss in 20 years for the financial year ended last June
[HONG KONG] Distressed Hong Kong builder New World Development’s shares and US dollar bonds rose the most in several months after a report that the company and its controlling family are in talks for a potential financing deal for as much as US$2.5 billion.
The Hong Kong-listed property firm’s shares jumped as much as 16 per cent, the most in five months, before paring some of the gains. Some of New World’s US dollar bonds rose about 2 US cents, according to credit traders. Its 4.5 per cent notes due in 2030 were at about 53 US cents and on track for their biggest gain in two months, Bloomberg-compiled data show.
New World and its controlling Cheng family have been in talks with Blackstone over the potential financing deal, Octus reported late Wednesday, citing two sources briefed on the matter. Under proposals discussed, Blackstone and the Cheng family would co-invest about US$2.5 billion into New World, with options discussed for the investment in the form of preferred or ordinary equity, the report said.
The deal might culminate with a take private offer jointly by the family and the private equity firm, it said, citing the two sources briefed on the matter. Talks are preliminary and subject to change, according to the report.
New World did not immediately comment while Blackstone declined to comment.
Controlled by the family empire of Hong Kong tycoon Henry Cheng, New World has one of the highest debt burdens of any Hong Kong developer amid a years-long property slump in the city and mainland China. Investors have become increasingly sceptical of the firm’s ability to manage its debt burden, particularly after it reported its first loss in 20 years for the financial year ended last June.
But developments in recent months have helped avert any immediate crisis. In June this year, the real estate giant sealed a record US$11 billion refinancing with dozens of banks. It has also been trying to complete a loan of up to HK$15.6 billion (S$2.6 billion) led by Deutsche Bank, though it recently missed a self-imposed target for that effort.
Despite the initial moves in the credit market on Thursday, some observers flagged risks if any discussions about a potential privatisation were to advance.
For bondholders, it would mean “even less transparency and public scrutiny of corporate governance, debt usage, and deleveraging progress, which is not positive”, said Zerlina Zeng, head of Asian strategy at Creditsights Singapore. BLOOMBERG
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