Deals pulled as Europe debt crisis sours market sentiment

The widening debt crisis in Europe is beginning to have a contagious effect on the Asian capital market, with issuers calling off or downsizing their fundraising plans.


Hong Kong’s Swire Properties is the latest victim of the fallout in Europe. The spin-off of Hong Kong-listed conglomerate, Swire Pacific, on May 6 called off its plans to raise USD2.7 billion in a Hong Kong IPO in response to worsening market conditions. It was scheduled to price the deal a day later on May 7. 


“[Swire Pacific] is naturally disappointed at this outcome but feels that it would be wrong to proceed with the proposed spin-off given the recent sharp deterioration in the market,” says Christopher Pratt, chairman of Swire Pacific in a statement to the Hong Kong exchange on May 6.


“Consideration was given to amending the terms for the offering, but it was felt that this would undervalue the world class assets of Swire Properties and be against the interest of shareholders,” he added.


The company was selling 910 million shares at HKD20.75-HKD22.90 apiece in what would have been Hong Kong’s biggest IPO in more than a year. Goldman Sachs, HSBC and Morgan Stanley were the joint global coordinators of the deal.


Swire Properties is one of the several companies that have seen their fundraising plans affected by the crisis in Europe.


India’s Essar Energy – the energy unit of Indian conglomerate Essar Group – was forced to reduce the size of its London IPO last week by pricing the deal below the initial pricing range. The stock then suffered in the aftermarket, slumping more than 7% in its debut trading on May 4.


Essar Energy on April 30 raised £1.273 billion (USD1.95 billion) selling 303 million new shares at £4.20 per share, which was below the initial pricing guidance of £4.50 - £5.50.


A week later, its sister firm, Essar Steel Holdings, shelved its plan for the sale of dollar-denominated bonds in response to the dwindling market sentiment. "The company believes that it will be much better placed to achieve their desired result in the debt capital markets in the near- to medium-term and so has decided to postpone their planned financing for the time being," an Essar spokesman said in a statement.


The company had announced its plans for a seven-year dollar-denominated bond deal on April 12 to refinance debt and fund potential acquisitions.


Meanwhile, Chinese shipbuilder New Century Shipbuilding on May 4 pulled out its plan to raise up to SGD666.4 million (USD 474.789) in Singapore’s largest listing since CapitaMalls Asia’s USD1.78 billion IPO in November 2009.


However, some reports suggest that the deal may have been called off for a different reason. Singapore’s Business Times reported that New Century was forced to cancel its listing plans after the Singapore Stock Exchange received complaints that the company had included two terminated shipbuilding contracts worth a total of USD180 million in the prospectus, and had failed to disclose that it was reportedly facing a legal claim of USD60 million over these two contracts.


New Century in its statement to the Singapore Stock Exchange on May 4 did not give a reason for the cancellation of IPO, but said in that it will “review the situation and will consider [listing in Singapore] at an appropriate time in the near future.” The company was schedule to close the IPO on May 5.




7 May 2010


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