Hong Kong's New World seeks US$3.2bn in discounted rights issue
The debt-laden developer is offering 11 new shares for every one held at HK$0.90, an 81.5 per cent discount to Thursday's close, with the Cheng family backing the plan.
New World Development plans to raise HK$24.9 billion (US$3.2 billion) from shareholders in a rights issue priced at HK$0.90 a share, an 81.5 per cent discount to the stock's last closing price, as the Hong Kong property developer works to reduce debt.
The company will issue 11 new shares for every existing share, the South China Morning Post reported. The HK$0.90 offer compares with a close of HK$4.87 on Thursday. Shareholders who decline to take up their entitlement face theoretical dilution of 75.3 per cent, according to the SCMP.
Nikkei Asia reported the proposal was made on Sunday and that the new capital would be used to prepay and service loans and to fund the developer's project pipeline. The move came after talks with potential investors failed to produce a deal, Nikkei Asia said.
The Cheng family, which controls New World, is backing the recapitalisation, the SCMP reported.
A rights issue gives existing shareholders the first claim on newly issued stock, usually at a price below the market. Investors who do not subscribe see their slice of the company shrink, which is where the 75.3 per cent dilution figure comes from.
Both outlets describe New World as heavily indebted; the SCMP called the company indebted in its headline and Nikkei Asia described it as debt-laden. The developer is among Hong Kong's best-known builders, and the size of the cash call makes the subscription a test of how far its existing owners and the family that controls it will go to keep the company financed.
The pricing means new money enters the company at a fraction of what existing shares last traded at. New World has not said, in the reports available, how much of the issue the Cheng family itself intends to take up.
The two reports differ on timing detail rather than substance: Nikkei Asia dated the proposal to Sunday, while the SCMP anchored its account to Thursday's closing price and the discount to it. Neither report gave a date for the shareholder vote the plan would require.
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