(Bloomberg) -- New World Development Co. Ltd. has bought back $610.3 million of seven dollar bonds in an effort to shore up its finances amid a long-running slump in China’s property sector.
New World, Hong Kong billionaire Henry Cheng’s flagship property business, said the tender offer settlement date is expected to be on or about Dec. 5, according to a company statement filed with the Hong Kong stock exchange on Tuesday morning. The buyback amount is slightly above the maximum acceptance amount of $600 million that it originally announced in November.
The purchase is intended to “optimize the cost of its capital and debt profile,” the real estate company said in the November filing.
The buyback could slightly lower New World’s annual debt cost by about $27.4 million, Bloomberg Intelligence analysts Patrick Wong and Yan Chi John Wong wrote in a note Tuesday. But it “might still need to buy back more bonds to cut its debt cost.”
The buyback comes after New World unveiled plans in June to sell NWS Holdings to the Cheng family in a HK$35.5 billion ($4.6 billion) deal. The sale of NWS, whose operations range from roads, construction and logistics to insurance, would help the developer reduce its debt and focus on its core property business.
In recent years, New World has expanded aggressively in China and is working on two of the biggest retail developments in Hong Kong, including a $2.6 billion mall-office complex next to the airport.
The strategy has come at a cost for the company, driving its debt load higher just as interest rates are soaring. Its net debt to equity was 94% at the end of June, according to Bloomberg Intelligence. That compares with 42% at rival Henderson Land Development Co., and Sun Hung Kai Properties Ltd.’s 18%.
Some of New World Development’s dollar bonds have been traded under 70 cents on the dollar for past six months, a territory that’s generally considered as being distressed. And shares were down for a ninth day on Tuesday, their longest losing streak since April, taking the year-to-date decline to 51%.
--With assistance from John Cheng.
(Updates with context and market moves starting in fourth paragraph.)
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