New World gets 100% lender approval for US$11 billion refinancing
[HONG KONG] Distressed Hong Kong builder New World Development has secured written commitments from all banks for a US$11.1 billion loan refinancing, people familiar with the matter said, bringing it closer to finalising the critical lifeline just days before a deadline.
The deal is all but done, with only procedural steps left for lenders to sign the loan documents, which should happen shortly, according to the people. It brings relief just as investors had been closely watching debt deadlines, including interest totalling US$9.2 million due Friday (Jun 27) and Monday on three local-currency bonds.
New World's refinancing – which would be one of the largest of its kind ever in Hong Kong – marks the end of months-long negotiations for a debt package that would pull it from the brink of default. It buys time even as a prolonged property downturn in China continues to weigh on the builder, whose 11 Skies mall project opening in phases next to Hong Kong's airport is one of the first things many visitors to the city see.
The developer's shares rose as much as 6 per cent in Hong Kong on Friday morning, before paring gains to about 1 per cent. It's now trading at around HK$5.9, set for the highest level in three months, according to Bloomberg-compiled data. Some of its dollar bonds were up 1 to 3 US cents, according to credit traders.
The deal comes with little time to spare. Documentation shows that if New World didn't achieve a 100 per cent approval by June 30, the refinancing could fall through as any collateral pledged would be released and bank commitments cancelled.
Controlled by the family empire of Hong Kong tycoon Henry Cheng, New World has faced significant challenges amid the real estate slump in Hong Kong and mainland China, following years of aggressive debt-driven growth. Investors had grown increasingly concerned about the firm's ability to manage its debt, particularly after it decided to delay interest payments on four perpetual notes, triggering a bond selloff.
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The refinancing agreement would push back HK$63.4 billion (S$10.29 billion) of borrowings that were set to come due this year and next, extending the maturities for three years, Bloomberg reported earlier. For HK$24.1 billion in loans due in 2027 and beyond, the maturities would remain the same, but New World will have to add some credit enhancements and put up additional collateral.
New World didn't respond to a request for comment.
The developer has put about 40 of its properties into the refinancing's collateral pool, including its headquarters, New World Tower, as well as a second ranking mortgage on its commercial complex on the city's waterfront, Victoria Dockside. The deal also carries a letter of comfort from Chow Tai Fook Enterprises.
Once closed, the deal would grant New World some short-term reprieve.
But strains will persist. Attention is now shifting to whether the builder will be able to raise an additional HK$15.6 billion via a loan secured by the first ranking mortgage on Victoria Dockside. Part of the proceeds raised would repay the completed refinancing, Bloomberg News previously reported.
Separately, for the bond interest payments, the developer owes HK$11.5 million for the coupon payment on a 4 per cent Hong Kong dollar note, followed on Monday by HK$36.7 million on a 4.89 per cent security and HK$24 million on a 4.79 per cent one, according to Bloomberg calculations.
Those obligations are on regular bonds that don't carry options to push back payments. And New World paid interest on another regular dollar note earlier this month. BLOOMBERG
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