Investment Grade Rating and Financing Commitment for NWS Holdings
New World Group today announced that NWS Holdings Limited ("NWS Holdings") - Pacific Ports Company Limited ("PPC") (659.HK) after it has been enlarged and renamed as part of the proposed reorganization of the Group - has received an investment grade rating of BBB- from Standard & Poor's ("S&P "), as well as commitment for HK$7 billion in bank financing. This and other information about the Group's planned reorganisation are detailed in separate shareholders'circulars distributed to shareholders of New World Development Company Limited ("NWD") (17.HK), New World Infrastructure Limited ("NWI") (301.HK), and PPC dated November 18, 2002.
The distribution of the shareholders'circulars followed the Group's announcement on October 21, 2002 of the proposed reorganisation, which was aimed at streamlining the Group's organisation structure, increasing transparency, and enhancing value for the shareholders of the three companies.
Concurrent with the distribution of the circulars, S&P issued an investment grade rating of BBB- for NWS Holdings. This is in line with international investment grade rated companies such as CITIC Pacific, Swire Pacific, and General Motors. S&P cited NWS Holdings'"diverse and well-established businesses," which will generate strong cash flows and solid interest coverage of about seven times, as the primary reason for the investment grade rating.
The HK$7 billion bank financing commitment which NWS Holdings has received is provided by Bank of America, Bank of China (Hong Kong) Limited, The Development Bank of Singapore Limited, The Hongkong and Shanghai Banking Corporation Limited, Industrial and Commercial Bank of China (Asia) Limited, and Hang Seng Bank Limited.
Commenting on the proposed reorganisation, Dr. Henry Cheng Kar-Shun, Managing Director of NWD, said, "Senior management is highly committed to the reorganisation, which we believe will be a 'win-win' proposal for all shareholders. We have received confirmation from independent financial advisors and the independent boards that the valuation and consideration for all companies are fair and reasonable. Furthermore, we believe the benefits for all shareholders should be substantial."
The key benefits of the reorganisation are as follows:
‧NWS Holdings (the enlarged and renamed PPC following the reorganisation) will have a stronger ability to capture growth opportunities in greater China than PPC.
‧A substantial increase in recurrent cash flows for NWS Holdings. NWS Holdings pro forma adjusted EBITDA for the year ended 30 June 2002 would be in excess of HK$3 billion compared to approximately HK$451 million for PPC.
‧A significant improvement in cash earnings and earnings per share for NWS Holdings. NWS Holdings would have had pro forma cash earnings of more than
5.6 times that of PPC for the year ended 30 June 2002, or HK$0.12 per share, approximately 1.7 times that of PPC.
‧Increased Scale for NWS Holdings. NWS Holdings pro forma turnover for the year ended 30 June 2002 would have been greater than HK$12.4 billion, more than 99 times that of PPC. Pro forma consolidated total assets is approximately HK$37.2 billion, almost 10 times that of PPC; while pro forma consolidated net tangible assets is approximately HK$8.9 billion, representing 2.4 times that of PPC. The PPC shares held by the public will increase from approximately 515 million shares to approximately 6.9 billion shares.
‧Significantly reduced gearing for NWI. New World Infrastructure's pro forma net gearing would have fallen below 15% following the reorganisation as compared to 72% as at 30 June 2002.
‧Enables NWI shareholders to hold shares in two separate companies.
‧Better utilisation of Group assets to reduce its debts. NWS Holdings aims to reduce its debt by approximately HK$5 billion over the next three years.
‧More streamlined organisation structure.
‧Greater business focus.
‧Value unlocked from the Group's subsidiaries.
NWS Holdings is expected to become a leading infrastructure, ports development, and services company, with its future strategy focused on leveraging its stable cash flow businesses to pursue select growth opportunities; reducing gearing, while maintaining an acceptable return on equity; and targeting a dividend policy which is in line with comparable stable cash flow businesses.
Commenting on the credit rating, Mr. Chan Kam-Ling, Managing Director of New World Services Limited ("NWS") who will take on a leadership role within NWS Holdings after the reorganisation, said that "an investment grade rating for NWS Holdings reflects S&P 's confidence in the strength of our infrastructure, ports, and services businesses and the ability to achieve continued debt reduction for the Group. The investment grade rating will enable NWS Holdings to refinance existing debt on attractive terms, and in the future, will allow it to access with greater ease the capital markets for financing."
The reorganisation, subject to shareholder approval, will see PPC acquiring traditional infrastructure assets from NWI and the share capital of NWS. NWI will then distribute all PPC shares it holds to its shareholders and PPC will be renamed NWS Holdings Limited (659.HK).
PPC, NWI, and NWD will be holding their respective special general meetings at 10:30 a.m., 11:30 a.m., and 12:00 p.m. on December 12, 2002 at Room 403, Room 405, and Room 407 of Level 4, Hong Kong Convention and Exhibition Centre, 1 Harbour Road, Wanchai, Hong Kong. A form of proxy will be valid if returned 48 hours prior to the special general meeting. Shareholders listed on the register at 4:00 p.m. on December 11, 2002, will be entitled to attend and vote at the special general meeting.
Morgan Stanley is acting as financial adviser to NWD and NWI in this transaction, while BOCI Asia Limited and Industrial and Commercial Bank of China are acting as financial advisers to PPC.
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About New World Development Company
New World Development Company Limited (17.HK), established in Hong Kong in 1970 as a property development company, has gradually developed into one of Hong Kong's leading diversified conglomerates. The Company, listed in Hong Kong in 1972, is one of the constituent stocks of the Hang Seng Index with total assets exceeding HK$130 billion. Through acquisitions and start-ups, the Group has expanded its core businesses to include property, infrastructure, services and telecommunications. New World Infrastructure, Pacific Ports, New World Services and New World China Land Limited are principal subsidiaries of the Company. As at the date of this press release, the Company has an effective interest of approximately 54.4% in New World Infrastructure (which, in turn, has an interest of 75% in Pacific Ports) and an interest of approximately 52.4% in New World
Services.
For further information, please visit our website: www.nwd.com.hk
About New World Infrastructure
In October 1995, New World Infrastructure (301.HK) became the first infrastructure company to list on the Hong Kong Stock Exchange. With basic infrastructure and TMT investments exceeding US$2 billion, the company is among the largest investors in the Mainland, Hong Kong and Macau. The company is present in 14 PRC provinces, 2 municipalities and 2 Special Administrative Regions. The basic infrastructure portfolio includes cargo handling, toll roads, bridges, energy and water treatment. The company has stakes in over 70 projects, encompassing 1,146 km of highways, six bridges, power generation of 1,924 MW, cargo handling capacity of 5.2 million TEUs per year and water treatment capacity of 2.8 million cubic meters per day. In addition, New World Infrastructure invests in the TMT segment in telecommunications, media and technology companies and services.
For further information, please visit our website: www.nwi.com.hk