Cash-strapped Hong Kong developer Lai Sun Development has agreed to sell its 50% interest in an office tower in the city’s central financial district for HK$3.5 billion ($450 million), the company said in a filing on Tuesday.
The net sale proceeds of HK$2.4 billion will help bolster cash flow for Lai Sun, which has been scrambling to refinance bank loans and sell assets amid mounting financial stress.
Hong Kong’s debt-laden developers are under growing pressure as property sales slump, prospects for a near-term recovery in the commercial sector remain weak, and funding options dwindle.
Lai Sun’s stake sale involves 12 of the tower’s 27 floors and a number of parking spaces, and would be one of the largest such deals by value in the city this year.
The buyer was Jasmine Investment Development IV Limited, a company incorporated in the British Virgin Islands. No further information on the buyer was provided.
The remaining 50% interest in value terms is held by CCB International, an investment banking arm of China Construction Bank.
The transaction price represents a 6.7% discount to a July valuation, reflecting macroeconomic conditions and market sentiment, the filing said. Lai Sun expects to book a HK$261 million loss on the disposal, though it will be a non-cash item in its financial reports.
“The sale will significantly improve the group’s financial position,” Lai Sun and its parent Lai Sun Garment said in the filing.
Both companies expect to shift from net current liabilities to net current assets after the sale, which is due to close in January, alongside the successful refinancing of a syndicated loan in September.
Lai Sun Development’s auditor flagged uncertainty over its ability to continue as a going concern after the developer reported a HK$2.9 billion net loss for the year ended in July, with current liabilities exceeding current assets by HK$4.5 billion.
The company faces bond repayments of $524 million next year, the highest among Hong Kong’s cash-strapped issuers.
($1 = 7.7805 Hong Kong dollars)
Reuters
