Henderson Land Shares Plummet on Plan to Raise $1B in Convertible Bonds

With Hong Kong’s real estate giants continuing to face pressure from falling property values, Henderson Land Development on Tuesday announced it is raising HK$8 billion ($1.02 billion) in convertible bonds.

The bonds which mature in July 2030 will bear a 0.5 percent annual interest rate, according to a Hong Kong stock exchange filing by Henderson Land, which pointed to the low borrowing cost as part of the fundraising rationale. 

“The board considers that the issue of the bonds will enable the company to raise financing on attractive terms and diversify the funding sources of the group, which will support the group’s ongoing business development,” the company said.

The fundraising was announced just over one week after Henderson’s competitor, New World Development, refinanced $11 billion in debt as it struggled to pay creditors, with JLL saying this week that Hong Kong commercial property values may fall another 10 percent this year.

Shares Plummet

With an initial conversion price of HK$36 per share, the bonds can be converted into approximately 222 million Henderson Land shares, which is equivalent to 4.4 percent of the developer’s enlarged equity capital.

Henderson Land’s shares tumbled by as much as 11 percent on Wednesday morning to HK$25.20 before finishing the day on Thursday at HK$25.80. Share in the company are now over 11 percent in the past five trading days.

Henderson Land is listing the Hong Kong dollar denominated bonds overseas via its British Virgin Islands-incorporated subsidiary Happy Ever Holdings Limited. HSBC serves as the bond issue’s bookrunner and lead manager. 

HSBC conducted a bookbuilding exercise with investors, after which the terms of the offer were finalized. The bonds will be offered to at least six professional investors, who are independent third parties.

Henderson Land expects to gain HK$7.9 million in net proceeds from the issue of the bonds, and intends to use them “for general corporate purposes and refinancing”, the company said.

Financial Strains

Plunging property values have put pressure on the bottom line of Henderson Land, with property agency data showing a more than 40 percent decline in Grade A office rents from 2019.

Henderson Land, which is one of the largest office landlords in the city’s Central financial district, saw its 2024 net profit decline by nearly a third to HK$6.3 billion, which included a fair-value loss of HK$2 billion that dragged the company’s performance significantly below analyst expectations.

In addition to New World’s refinancing, Hong Kong-listed developer Grand Ming Group said this week that it was seeking waivers from lenders after falling into default on $610 million in outstanding loans. That shortfall was triggered by the company’s failure to maintain its consolidated net gearing ratio among other factors.

In late June HKEX-listed builder Emperor International revealed in its annual results that it had overdue loans totalling approximately $2.1 billion as fair value losses on its property holdings contributed to a HK$4.7 billion loss for the 12 months ending 31 March.