Distressed Hong Kong builder New World Development Co. has closed a HK$88.2 billion ($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 Monday. The developer also said it aligned its other existing offshore unsecured bank loans with the terms of the new refinancing loan.
The deal had been all but done after the cash-strapped builder last week secured written commitments from all participating banks, and only procedural steps 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 to preserve liquidity and stabilize its finances. Documentation shows that if the company hadn’t achieved a 100% approval by June 30, the refinancing could have fallen through as any collateral pledged would be released and bank commitments canceled.
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.
The new bank facility consists of multiple tranches of bank loans with different maturities, with the earliest maturity date being 30 June 2028, and includes financial covenants and security interests granted over certain of the group’s assets. The deal gives the group more flexibility to better manage its expected ongoing business and financial needs, the filing says.
See also: New World Development scion Adrian Cheng resigns from board
Echo Huang, chief executive officer of New World Development said the company’s financial management strategy is to prioritize on reducing indebtedness and improving cash flow, in a press release on the company’s website. The developer will continue to adhere to its existing financial obligations, she added.
