TOO BIG TO FAIL?
Until recently, the city’s old money had it easy. The name brand itself spelled investment grade. As of last June, nearly 70 per cent of New World’s bank loans were unsecured. In addition, local borrowers could issue bonds governed by English law.
By comparison, dollar notes from mainland developers, such as China Evergrande Group, had to follow New York law. For issuers, this law might be more stringent in the event of consent solicitation, where a company asks to change the terms of its securities.
But that leniency is running thin. Granted, New World managed to eke out an US$11.2 billion loan refinancing deal – perhaps because when it owes banks so much money, it owns them. Others may not be so lucky.
Already, lenders are tightening the screws on smaller developers, asking for more collateral and halting new loans altogether. As for bond investors, they no longer assume Hong Kong businessmen would act any differently from those in the mainland. They are not.
It’s scrutiny time. Hong Kong’s A-listers deserve a more careful look.
https://www.channelnewsasia.com/commentary/hong-kong-tycoons-new-world-development-emperor-far-east-loans-bonds-debt-5231186
