Hong Kong developer Lai Sun seeks note swap in bid to ease liquidity pressure

Hong Kong developer Lai Sun Development, chaired by businessman Peter Lam Kin-ngok, who also chairs the city’s Tourism Board, has launched an exchange offer for its outstanding US$493 million worth of 5 per cent guaranteed notes due July 2026, in an effort to relieve short-term liquidity pressures, the company said Monday in a filing to the Hong Kong stock exchange. Eligible noteholders can swap their existing holdings for new, US dollar-denominated senior guaranteed notes carrying an 8 per cent annual coupon with a three-year tenor. While the residential property market has shown signs of recovery, commercial real estate markets in Hong Kong and mainland China remain challenging. Continued downward pressure on market valuations and negative rental reversions remain. As of April, overall vacancy rates in Hong Kong’s premium office spaces stood at 13.5 per cent, unchanged from March, according to data tracked by JLL. While four other core office areas saw an uptick in empty spaces, Central’s vacancy rate declined to 9.2 per cent from 9.6 per cent, data showed. “These adverse market conditions have materially and negatively affected the group’s business, operating results and financial and liquidity position,” the developer said in the filing. The group’s portfolio includes office, retail and hospitality projects in Shanghai and Guangzhou, Zhongshan and Hengqin in Guangdong province. In Hong Kong, it owns commercial and office buildings including Causeway Bay Plaza 2 and Cheung Sha Wan Plaza, as well as a 50 per cent interest in the China Construction Bank (CCB) Tower in Central. Lai Sun has been actively refinancing its borrowings with various creditors to improve its overall liquidity position, completing transactions totalling more than HK$7 billion (US$893.39 million) over the last 12 months. It entered into an agreement with an investment entity of JD.com to sell its 50 per cent stake in the CCB Tower for HK$3.5 billion in December last year. In 2024, it also sold its equity stake in the AIA Central skyscraper for HK$1.42 billion to a unit of the insurance giant. The group had outstanding borrowings of HK$25.8 billion as of April. If the swap is successfully completed by July 22, holders of each note will get US$300 in cash plus US$700 in new notes, or they will have the entire amount converted into new notes. As part of the consent solicitation, Lai Sun is also seeking noteholder approval to extend the existing notes’ maturity date by three years to July 2029. A bondholder meeting will be held on July 10 in Hong Kong to vote on the proposal.