Key Takeaways
A proposed $4 billion tie-up between Blackstone Inc. and New World Development has been terminated after the developer’s founding family refused to cede control, a move that leaves the heavily indebted property group scrambling for alternatives.
The breakdown of the deal, reported by Bloomberg and Reuters citing people familiar with the matter, underscores the challenge facing one of Hong Kong’s most indebted developers as it seeks to shore up its finances. Blackstone, which had advanced furthest in negotiations, made its investment contingent on gaining control, a condition the Cheng family, holding a 45.24% stake, ultimately rejected.
New World Development, with a market capitalization of approximately $3 billion, has seen its shares climb about 29 percent this year even as it seeks to refinance debt. The company’s shares closed down 1.37 percent on Wednesday following the news. The developer has been in talks with other financial institutions, including a consortium led by RRJ Capital and another by Ares Management Corp., though progress has been slow.
The collapse of the Blackstone deal highlights the difficult position of New World, which must now navigate its significant debt burden without a major cash injection. The core of the problem for any potential investor remains an approximately HKD 70 billion liability connected to a long-term lease agreement for its 11 SKIES project, according to reports. Until this issue is resolved, securing a strategic partner on favorable terms appears increasingly difficult.
New World is reportedly in negotiations with the Airport Authority Hong Kong to terminate the original lease agreement and potentially transfer a shopping mall, valued at HKD 30 billion, to the authority at no cost as a way to clear the liability. Other potential investors, unlike Blackstone, have not insisted on control, instead proposing minority stakes or capital injections collateralized by family-pledged shares. However, all parties have made resolving the 11 SKIES liability a precondition for any transaction.
This article is for informational purposes only and does not constitute investment advice.
