(Nov 3): New World Development Co will issue up to US$1.9 billion of new debt as part of an exchange offer for some of its outstanding notes, adding to a slew of recent fundraisings at the cash-strapped Hong Kong developer.
The company will raise as much as US$1.6 billion in new perpetual securities and US$300 million in fresh notes, according to an exchange filing on Monday. Controlled by the billionaire Cheng family, New World said the move aims to optimise its debt maturity profile, enhance liquidity and strengthen its financial position amid challenging market conditions.
The developer said it will offer a senior perpetual dollar bond yielding 9% and a senior secured dollar bond maturing in 2031 at 7%. The exchange offer also asks bondholders to forfeit accrued and unpaid distributions under five perpetual notes.
The exchange offer terms are decent, said Zerlina Zeng, the head of Asian strategy at Creditsights Singapore. “However, the company’s decision to forgo accrued interest on the dollar perpetuals and the absence of equity funding are disappointing,” she added.
New World continues to face financial challenges, even after completing an US$11 billion loan refinancing deal. Earlier this year, the company decided to defer interest payments on four perpetual notes, postponing US$77.2 million of debt obligations due in June. The deferral also caused one of its perpetual bond’s interest rate jumped to more than 10%.
The company has a total of US$7.9 billion of outstanding bonds, of which about 57%, or US$4.5 billion worth, are perpetual notes, according to Bloomberg-compiled data.
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Debt adviser PJT Partners Inc warned bondholders in June that a potential liability management exercise would involve discounted exchanges, which would be unfavourable to bondholders because valuable offshore assets would have been taken by banks.
The purpose of the exchange is to extend the company’s short-dated bonds, said Bloomberg Intelligence analyst Daniel Fan, and in general it is positive.
In September, New World secured a HK$3.95 billion (US$508.0 million) loan backed by its prized Victoria Dockside complex in Hong Kong’s Tsim Sha Tsui district. The amount of the facility was about 75% less than the upper end of the range it had earlier sought. Some of its existing lenders had previously expressed little interest in further increasing their exposure to the developer, which had missed a self-imposed target to complete the borrowing.
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