Swire Pacific Ltd. became the second notable Hong Kong company to announce plans to offload assets in as many days as part of efforts to reduce debt in the face of rising borrowing costs.
(Bloomberg) — Swire Pacific Ltd. became the second notable Hong Kong company to announce plans to offload assets in as many days as part of efforts to reduce debt in the face of rising borrowing costs.
The family-owned conglomerate announced late Wednesday it will sell its US beverages business to its controlling shareholder John Swire & Sons Ltd. for $3.9 billion. The sale would lower one measure of the company’s indebtedness by more than one-third, it said in a statement. The firm also proposed a special dividend of about HK$11.7 billion ($1.5 billion), representing about half of the expected gain from the disposal.Â
The deal came a day after the billionaire Cheng family announced a similarly structured $4.5 billion deal to buy a unit owned by builder New World Development Co. The move would effectively shift cash from the family’s investment holding company to New World, which is one of the city’s most indebted real estate firms.Â
Read more: Billionaire Cheng Family to Buy Out NWS in $4.5 Billion DealÂ
Rising borrowing costs are making it tougher for firms across the globe to juggle their debt loads. In Hong Kong, which imports its monetary policy from the US due to a currency peg with the greenback, the one-month cost of interbank borrowing has jumped to about 5% from less than 1% a year ago. A rare downturn in the property market is adding to economic pressures with major developers resorting to providing discounts and various perks to boost sales.Â
Swire Pacific, one of the city’s largest developers and owner of Cathay Pacific Airways Ltd., profits had already taken a hit after strict pandemic measures effectively shut down travel and tourism in the financial hub. Attributable profit from the property division in 2022 was HK$6.5 billion.
Under the agreement, Swire Coca-Cola, USA will be sold to a wholly-owned subsidiary of John Swire & Sons, the statement said. The US unit produces, sells and distributes Coca-Cola and other beverages in 13 states across western US and will continue to do so after the sale, the statement said, adding that the disposal is consistent with Swire Pacific’s focus on Greater China and Southeast Asia.
Last year, Swire Pacific agreed to buy Coca-Cola Co.’s bottling operations in Vietnam and Cambodia for about HK$1 billion, marking its first foray into the Southeast Asian beverages market.Â
Swire Pacific shares have tumbled 16% this year, although they rallied this week. In August the company announced plans to buy back up to HK$4 billion of shares. The firm is one of the last remaining British trading houses in Hong Kong.
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