HK Builder Lai Sun Seeks More Bank Support for Loan Refinancing
The property firm — controlled by local tycoon Peter Lam — has secured commitments from nine out of the original 19 lenders for the five-year refinancing, said the people, who declined to be identified discussing private matters. The existing loan matures on Oct. 5, according to Bloomberg-compiled data, adding urgency to Lai Sun's efforts.
Even if Lai Sun doesn't manage to secure the target amount from all banks, it could still opt to partially repay the loan and refinance the rest, the people said.
Lai Sun's financing challenges underscore the depth of Hong Kong's years-long property downturn, which has made banks cautious about lending to developers in the city. The company has already spent longer on its deal than property giant New World Development Co. took to complete its recent record loan refinancing, a process that only materialized after months of negotiations and meetings between banks and regulators.
Lai Sun's original loan was backed by its Cheung Sha Wan Plaza office tower and shopping center in Hong Kong's Kowloon district, and the refinancing would be too. The company has proposed an all-in pricing of about 160 basis points over the Hong Kong InterBank Offered Rate for the refinancing, the people said.
The cash flow generated from Cheung Sha Wan Plaza would be sufficient to cover interest expenses on the existing borrowing, according to the people. Lai Sun said in its interim results that the tower had an occupancy rate of 92.1%, generating HK$131 million in rental income for the six months to Jan. 31, down from HK$143 million a year earlier.
Lai Sun Development is the property arm of Hong Kong conglomerate Lai Sun Group, which is also known for its media and entertainment businesses. The parent's financial position has been under the spotlight since last year, when it shut some of its restaurants in Hong Kong, including Michelin-starred ZEST by Konishi.
The real estate unit reported a net loss of about HK$117.8 million for the six months ended January, narrowing from the year-earlier period. Property sales fell 33.2% to HK$617.2 million.
Separately, Lai Sun is also in talks to refinance another bank loan backed by some of the company's onshore assets, including Hong Kong Plaza in Shanghai, other people said. The HK$3.97 billion loan is due to mature in early 2026, they added.
Lai Sun didn't immediately respond to a request for comment.
Lai Sun had HK$34 billion of total liabilities as of Jan. 31, according to its latest interim report. Its 5% dollar note with $493 million outstanding is trading at about 52 cents, according to data compiled by Bloomberg, a distressed level reflecting investor concerns.
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