General syndication is underway for New World Development's HK$3 billion ($385 million) five-year amortising loan. The mandated arrangers for the deal are HSBC, Bank of China and ICBC Asia. BNP Paribas has also joined the deal as coordinating mandated arranger. The borrowing will be made by a SPV, which has not yet been announced and will be guaranteed by New World Development.
The average life of the loan is 4.175 years. The coordinating arrangers receive a 10bp underwriting fee and 70bp management fees for commitments of HK$400 million -HK$500 million. Banks joining on the arranger level with commitments of HK$250 million -HK$390 million receive 70bp management fees on a take-and-hold basis. Co-arrangers receive 65bp management fees for commitments of HK$150 million, while lead managers and senior managers receive 60bp and 55bp for commitments of HK$100 million -HK$140 million and HK$50 million -HK$90 million respectively.
General syndication, which is said to be proceeding well, will be closed in three weeks time. The proceeds from the loan will be utilised for refinancing of the HK$6 billion dual-currency seven-year loan tapped by New World Development in November 1997. That deal offered a margin of 50bp each over Hibor and Libor and had a put option at the end of the fifth year. Last May, New World Infrastructure (NWI) borrowed $350 million through a five-year loan priced at 115bp over Libor arranged by Deutsche Bank and HSBC.
Amortisation for the present five-year loan starts in several stages of the tenor, the first one being for 15% after 36 months. Another 15% falls due for amortisation after 42 months, 20% each after 48 and 54 months and a final payment of 30% on maturity.
As long as any amount remains outstanding in the facility, New World Development, as guarantor, is subject to certain covenants, some of which are as follows:
- It, or its subsidiaries are the beneficial owners of a 100% interest in each of the 'principal properties', i.e. New World Tower, Grand Hyatt Hong Kong, Renaissance Harbour View Hotel, New World Centre and Extension and New World Centre Palace Mall;
- The borrower remains a 100% subsidiary of the guarantor;
- Consolidated net borrowings (including contingent liabilities) of the company and its subsidiaries do not exceed 80% of its consolidated tangible net worth;
- It maintains a consolidated tangible net worth of not less than HK$45 billion;
- Not more than 45% of its consolidated fixed assets are subject to security interests in favour of third party creditors;
- Not more than 45% of its consolidated net borrowings are secured;
- Consolidated net borrowings shall not exceed 68% of the sum of consolidated fixed assets and properties held for sale.
Should the borrower, or its subsidiary or affiliate, dispose of all or part of its interests in any of the 'principal properties' at least 25% of the net proceeds of the disposal will be utilised to repay the outstanding amount under the facility. The prepayment shall be applied on a pro-rata basis in the order of the amortising schedule mentioned above.
Of the total long-term borrowings of HK$29.54 billion as of 31 December, 2001, unsecured loans (including bank loans) accounted for the lion's share amounting to HK$21 billion. Secured loans, including bank loans, amounted to HK$8.43 billion representing 28.54% of total long-term borrowings. Up to HK$18 billion of the total long-term borrowings fall due between now and December 2003, with another HK$11.17 billion maturing between 2004 and 2006. Consolidated net debt for the New World group as at 31 December, 2001 stood at HK$28.93 billion.
Despite a 19.82% drop in turnover to HK$12.75 billion for the six-month period ended December, New World was able to register net profit of HK$1.03 billion. That amounts to a 232% increase over the corresponding period in the preceding year. The group was able to achieve a reduction of HK$311.2 million in interest costs on account of falling interest rates last year.
