New World's distress worsens after shock delay on bond interest
[HONG KONG] Hong Kong developer New World Development is sliding deeper into distress after jolting investors by delaying interest payments on some bonds, marking the latest flashpoint in a years-long crisis in China's property market.
New World, which is grappling with HK$210.9 billion (S$272 billion) of liabilities, said in a filing late on Friday (May 30) that it's planning the deferment for coupons on four perpetual notes. In total, that means it's postponing US$77.2 million of debt obligations, according to Bloomberg calculations.
The bonds concerned slid to record lows. Its 6.15 per cent perpetual notes dropped about 3 US cents to 23 US cents on the US dollar after tumbling more than 30 US cents on Friday, on pace for its lowest level since issuance. Its 4.8 per cent perpetual securities fell 10 US cents to 15.5 US cents, also on track for a record low and the biggest daily decline since October 2022. Its shares slid as much as 11 per cent, the biggest intraday drop in about two months.
'While this will not trigger a default, the total amount to be repaid will pile up so the headwind should remain in the long run,' said Jeff Zhang, an analyst at Morningstar.
A company spokesperson said on Friday that the company was continuing 'to manage its overall financial indebtedness whilst taking into account the current market volatility and continues to comply with its existing financial obligations'.
While the market moves on Monday underscore how investor unease is worsening, there have also been some more positive developments for the builder, which is controlled by the family empire of tycoon Henry Cheng.
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Bloomberg reported earlier Monday morning that as at May 30, the company had received written commitments from banks for 60 per cent of HK$87.5 billion of loan refinancing that it's seeking by the end of June, according to sources familiar with the matter.
New World did not immediately respond to a request for comment on Monday morning.
The company also said on Friday that total contracted sales year-to-date amount to about HK$24.8 billion, representing over 95 per cent of the annual sales target, according to its monthly business update.
But markets clearly need more certainty on debt repayment plans after a years-long property slump in the city and mainland China has left New World with one of the highest debt burdens of any Hong Kong developer. Investors have also become increasingly sceptical after New World reported its first loss in 20 years for the financial year that ended last June.
The company's stock is trading at a price-to-book ratio of just 0.06, with a market capitalisation of US$1.4 billion versus about US$17 billion at its peak in 2019. BLOOMBERG
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