Cash-strapped firms may turn to HK to raise funds
Updated: 2009-05-19 07:10
By Lillian Liu and Yiyu Liu(HK Edition)
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HONG KONG: The city may see more cash-thirsty international companies turn to its equity market to raise needed funds using their Asian units as vehicles for fund-raising exercises, KGI Asia research head Ben Kwong said.
He sees the American International Group as just one of the Western companies going for or contemplating the spinoff of their Asian units via an IPO as a way to repair their damaged balance sheets at home amid the global recession.
"It's possible to see a trend in which global companies will turn increasingly to their profitable operations in Asia as a means of raising funds," he said.
"I believe Hong Kong will be a preferred fund-raising platform for them because it enjoys an edge over Singapore," he said. AIG officials said they plan to accelerate the spinoff of the group's Asian life insurance unit, American International Assurance (AIA), saying a public listing for AIA "would be in the best interest of all stakeholders, including US taxpayers, policyholders, employees and distribution partners."
Analysts said the planned IPO is aimed at raising funds to pay off some of the multi-billion dollar bailout money the US government has spent saving the insurer from bankruptcy.
The US government has pledged up to $182.5 billion for AIG's rescue.
AIG officials did not say which Asian stock market they will choose for the IPO, but some analysts in Hong Kong believe the city will likely be favored, especially because it serves as an ideal gateway for the US insurer to expand further its business on the mainland.
There is market talk that AIG could raise $5 billion to $10 billion in a Hong Kong offering, depending on the structure and extent of the share sale.
News of AIG's plan to accelerate its Asian IPO plan came shortly after debt-strapped US casino operator Las Vegas Sands Corp hired Goldman Sachs to look at a potential Hong Kong listing for its Macao unit.
Like AIG, Las Vegas Sands tried to sell off some of its casinos and other assets in Macao but failed, forcing the company to look at prospects of an IPO to raise funds and pay off debts.
The casino operator posted a loss of $111 million for the fourth quarter of 2008, compared with a $39.9 million net profit in the same period in 2007.
As a result of losses and continuing fall in revenue, the company, which operates the Sands and Venetian hotel/casino resorts in Macao, suspended some of its expansion projects there.
As it faces pressures to pay back loans in Las Vegas and Macao, Las Vegas Sands announced recently plans to lay off 4,000 workers in Macao to trim costs.
It said it would resort to other cost-cutting measures to save $470 million every year.
(HK Edition 05/19/2009 page16)