Great Eagle Holdings, a Hong Kong-listed landlord, said the spin-off of Champion Real Estate Investment Trust will help it slash as much as 55 per cent its debt, enabling expansion in hotels and other investment properties.
Great Eagle, which reaped about $10 billion from the listing of the reit two weeks ago, said its net attributable debt would drop to about $4.4 billion, for a gearing ratio of 22 per cent, if all the proceeds are used for debt repayment. Its debt stood at $14.31 billion at the end of last year with a gearing ratio of 59 per cent.
However, the management plans to use only half of the proceeds to reduce debt over the next 12 to 24 months, with the rest for future investments.
'We are comfortable with our debt levels,' deputy chairman and managing director Lo Ka-shui said, 'The reit proceeds will enhance our financial flexibility to explore new investment opportunities in hotels and other properties.'
Great Eagle, which wants to triple its hotels globally to 25 over the next decade, has been looking at adding hotels in China over the past year but no projects had yet been finalised, Mr Lo said.
The company, which turned a seedy part of Mongkok into a popular retail and office hub with its Langham Place development, saw its gearing ratio surge to as high as 87 per cent at the end of June last year due to the project's cost. Its debt also bought about a sharp rise in interest expenses, which largely offset rental growth last year.
