$28 Billion Shock: Hong Kong Giant Defers Debt Payments, Investors Blindsided
New World Development (NDVLY) has just reignited investor anxiety in Asias battered property sector. On the eve of Hong Kongs Dragon Boat Festival, the company quietly dropped news its pushing back coupon payments on four of its perpetual bondstotaling roughly $77.2 million. While this doesnt count as a technical default, the timing and lack of prior signals caught creditors off guard. Shares tumbled as much as 11% before closing down 6.5%, and its 4.8% perpetuals slid to just over 60 cents on the dollar before clawing back slightly. Several fixed-income desks scrambled late Friday, fielding urgent calls from senior PMs seeking clarity on what just happenedand why they werent warned sooner.
Warning! GuruFocus has detected 8 Warning Signs with NDVLY.
The developer, grappling with HK$220 billion ($28 billion) in liabilities, said the deferment is part of a broader effort to manage debt amid market volatility. But skepticism is rising. Morningstars Jeff Zhang noted the move, though not a default, adds to the future repayment burden. Nomura analysts called the action a credit negative, and floated the possibility of selective bond repurchases to ease pressure. Bondholder discussions with PJT Partners reportedly continue behind the scenes, though no formal action has been proposed. Its a stark reminder of the fragility still lingering in Hong Kongs real estate landscape, where rising vacancies and softening rents are squeezing even the most storied names.
There is, however, a thread of optimism. As of late May, New World had reportedly secured commitments for around 60% of the HK$87.5 billion in refinancing its targeting by end-June. Management expects more progress after the public holiday. On the sales front, year-to-date property sales have already hit 95% of its full-year goal, according to its latest business update. Still, with a share price trading at just 0.07 times book and a market cap of $1.4 billiondown from $17 billion in 2019investors will likely need more than sales milestones to regain confidence. The next few weeks could determine whether this is a short-term scare or the start of something deeper.
This article first appeared on GuruFocus.
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