Many Hong Kong businessmen are planning to sell their assets to cut debt. Swire Pacific, New World both announce plans to sell units, as firms are contending with rising borrowing costs.
Swire Pacific Ltd. has become the second notable Hong Kong company to announce plans to offload assets to reduce debt. The conglomerate on June 28 announced to sell its US beverages business to its controlling shareholder run by the wealthy Swire family for $3.9 billion. The sale would lower the company’s indebtedness by more than one-third, it said in a statement. It also suggested a special dividend of about HK$11.7 billion ($1.5 billion), which is about half of the expected gain from the disposal.
The deal came a day after the billionaire Cheng family announced a similar deal of $4.5 billion to buy a unit owned by builder New World Development Co. The step would effectively shift cash from the family’s investment holding company to New World, which is one of Hong Kong’ most indebted real estate firms.
Rising borrowing costs are making it tougher for companies worldwide to manage their debt loads. In Hong Kong, the one-month cost of interbank borrowing has jumped to about 5 percent from less than 1 percent a year ago. An unusual slump in the property market is adding to economic pressures with major developers resorting to providing discounts and perks to increase sales.