New World Development Launches Tender Offer for $600 Million Debt Buyback

Hong Kong-based New World Development has unveiled plans to initiate a tender offer, seeking to repurchase up to $600 million of its outstanding dollar-denominated debt. This strategic move comes shortly after the company received HK$21.8 billion (US$2.8 billion) from an asset sale to its controlling family. The developer's buyback offer encompasses portions of five bonds set to mature between 2027 and 2031, in addition to two perpetual securities, representing a combined outstanding face value of $4.14 billion.

The buyback initiative is structured as a modified Dutch auction, wherein New World Development will accept the lowest prices until the maximum buyback amount is achieved. The offer is slated to conclude on December 1, with results anticipated by December 4, barring any extensions. The company reserves the right to decline any or all of the offer tendered by bondholders.

Chairman Henry Cheng Kar-shun clarified the rationale behind the move, stating, "The offer also provides liquidity to investors at a premium to the market price." He further emphasized that the primary goal is to optimize the cost of capital and manage the debt profile effectively.

Goldman Sachs, HSBC, Mizuho Securities, and UBS have been appointed as dealer managers for the buyback, with Orient Securities serving as the co-dealer manager. New World Development, under the control of Hong Kong's third-richest billionaire family led by 76-year-old Henry Cheng, has been actively addressing financial challenges amid sliding home prices and increased borrowing costs. The company recently concluded the sale of its 60.9% stake in NWS Holdings for HK$21.8 billion.

As of June 30, the company reported HK$54.5 billion in cash and consolidated net debt of HK$130.8 billion, reflecting a gearing ratio of 48.7%. This marked an increase from 43.2% a year earlier. Concerns regarding New World Development's debt burden, among the highest for Hong Kong developers, have impacted its stock price, resulting in a 76% decline in market value from its peak in 2019. The shares experienced a 3.9% decline in recent trading, reaching HK$13.38 and marking a 40% drop in value for the year.

In the public tender, New World is offering to pay between 76 cents and 90 cents on the dollar for the five straight bonds, compared to their indicative market prices of 72 to 87 cents. Additionally, it is offering 60 to 87.5 cents on the dollar for the perpetual notes, against market levels of 57 cents and 84 cents, respectively. The debt buyback initiative is a crucial component of the company's broader strategy to bolster its financial position and alleviate concerns about its debt levels in the market.

By fLEXI tEAM