Under the recapitalization plan, existing investors are offered 11 rights shares for every share held at an 81.5 per cent discount of HK$0.90 each. Proceeds will primarily fund the partial prepayment and maturity extensions of roughly HK$82 billion in bank loans, as well as pay down senior notes and deferred perpetual security distributions. This balance sheet restructuring is projected to lower the developer's net debt to total equity ratio from 68.3 per cent down to 48.3 per cent.
Key points
The heavily discounted rights issue provides crucial liquidity to withstand ongoing press…: The heavily discounted rights issue provides crucial liquidity to withstand ongoing pressure across the Hong Kong property market.
Substantial de-leveraging will reduce the company's net debt to total equity ratio by twe…: Substantial de-leveraging will reduce the company's net debt to total equity ratio by twenty percentage points.
Controlling backer Chow Tai Fook Enterprises signaled backing for future dividend resumpt…: Controlling backer Chow Tai Fook Enterprises signaled backing for future dividend resumptions once financial conditions sufficiently stabilize.
Sources checked by our analysis pipeline: 1
BEIJING/HONG KONG, Nov 15 : Hong Kong property developer New World Development on Sunday proposed a rights issue to raise about HK$24.9 billion ($3.17 billion), a company filing showed.
New World Development has been trying to cut debt, dispose of assets and bolster liquidity amid tight credit conditions and a weak property market.
• The plan offers shareholders 11 rights shares for every existing share at HK$0.90 each, representing a 26.9 per cent discount to the theoretical ex-rights price of HK$1.23 per share
• The subscription price also represents an 81.5 per cent discount to the last closing price
• Controlling shareholder Chow Tai Fook Enterprises (CTFE), which owns about 45.3 per cent of the company, has committed to take up its full entitlement and fully underwrite the remaining shares. The maximum CTFE commitment is about HK$18.7 billion
• A CTFE statement said it supports New World Development resuming dividend payments when its financial performance and liquidity permit.
• The company plans to use about 34 per cent of the proceeds to prepay 10 per cent of about HK$82 billion…
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