New World tells creditors not much room to sweeten debt swap
The plan to swap existing debt for new securities includes haircuts of as much as 50% on perpetual bonds
[HONG KONG] New World Development told some creditors during meetings this week that there’s not much room to sweeten the terms of its US$1.9 billion debt swap proposal, according to people familiar with the matter.
The meetings come as some creditors have expressed concerns about the structure of the plan, said the people, who asked not to be identified discussing private matters.
New World, which completed an US$11 billion loan refinancing deal earlier this year, is facing continued challenges as the property market in Hong Kong and mainland China remains sluggish. The developer’s plan to swap existing debt for new securities includes haircuts of as much as 50 per cent on perpetual bonds and up to 28.5 per cent on regular notes – if holders agree to the plan by the early tender deadline of Nov 17.
One key feature of the plan is that holders of new notes would get first-ranking access to its prized Victoria Dockside complex as collateral. However, holders would still be subordinated to Deutsche Bank, the lender for a US$508 million loan backed by the same commercial asset, according to a more than 300-page offer document sent to creditors and seen by Bloomberg News.
Under the plan, a special purpose vehicle would issue the new perpetual notes, with no direct guarantee from New World, in contrast to the existing notes. That has led to concerns among some creditors that New World itself wouldn’t face the same penalties as it does for existing notes if it stopped making coupon payments on the perps, the people said.
New World is unable to make dividend payments to stockholders if it stops distribution payouts on the perpetual bonds, according to the terms of the existing notes. Earlier this year, New World decided to defer interest payments on four perpetual notes, postponing US$77.2 million of debt obligations due in June.
New World didn’t immediately respond to a request for comment.
Creditors were also seeking clarification on whether another proposal was in the works to deal with the US$1.3 billion of perpetual bonds the company will still hold, even if it secures full participation from holders in the debt swap, the people said. The company said it doesn’t have plans for further such offers, the people added.
New World has a total of US$7.9 billion of outstanding bonds, of which about 57 per cent, or US$4.5 billion worth, are perpetual notes, according to Bloomberg-compiled data. BLOOMBERG
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