New World Development (0017) on Sunday proposed an 11-for-1 rights issue to raise HK$24.9 billion at a steep 81.5 percent discount to its last traded price, in a major capital restructuring move to alleviate refinancing pressures and extend debt maturities.
The developer plans to issue about 27.68 billion rights shares at a subscription price of HK$0.90 each.
The proceeds will be primarily used to prepay 10 percent of the principal amount under HK$82 billion of targeted bank facilities. The remaining 90 percent of the targeted loans, amounting to HK$73.8 billion, will have their maturity dates extended by two years upon completion of the rights issue. Other proceeds will fund general debt servicing and the group's project pipeline.
Bailout talks and underwriting
The group’s controlling shareholder, Chow Tai Fook Enterprises, has irrevocably undertaken to take up its full entitlement of 12.55 billion shares. Together with HSBC and DBS, Chow Tai Fook Enterprises will fully underwrite the remaining shares.
If no other shareholders participate, the controlling shareholder's stake, alongside its concert parties, could surge from 45.59 percent to 72.55 percent, prompting an application for a whitewash waiver to avoid a mandatory general offer.
Rebuilding financial resilience
NWD chairman Henry Cheng Kar-shun said the recapitalization plan addresses near-term funding needs while giving the business flexibility to realize asset values in an orderly manner.
The controlling shareholder's underwriting commitment is "not intended to dilute or disadvantage minority shareholders, but to protect the company's quality assets and avoid forced sales at steep discounts during a challenging period," said NWD’s chief executive Echo Huang Shaomei.
Expressing strong confidence in the developer's prospects, Chow Tai Fook Enterprises said the timely cash call allows eligible shareholders to equally participate in the group's recovery. The controlling shareholder also pledged to support the resumption of dividend payouts once the developer's financial performance and liquidity position become appropriate.
Last month, reports surfaced that Bain Capital was exploring a funding injection alongside the Cheng family, while previous bailout talks with Blackstone reportedly collapsed after the Chengs refused to cede control.
Fourth cash call in two decades
This marks the developer's fourth rights issue in two decades. New World raised nearly HK$31 billion through three previous cash calls in 2004, 2011, and 2014, offering much smaller ratios at discounts ranging from 36 to 38 percent.
Trading in New World Development shares and related bonds will resume on Monday morning.
