New World’s distress worsens after delay on bond interest
By
Trista Xinyi Luo & Pearl Liu /
Bloomberg
02 Jun 2025, 09:32 pm
(June 2): Hong Kong developer New World Development Co 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$220 billion (US$28 billion or RM119 billion) of liabilities, said in a filing late Friday 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 earlier Monday before a late rebound helped three of them end Asian trading with gains. Its 4.8% perpetual securities dropped by more than six cents on the dollar to about 20, according to prices compiled by
Bloomberg. The company’s shares slid as much as 11%, the biggest intraday drop in about two months, before paring the loss to 6.5% at the market’s close.
“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 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.”
The news that New World would defer the perpetual note interest payments came on the eve of the Tuen Ng Festival, or the Dragon Boat Festival, in Hong Kong at around 7pm local time.
It stunned holders, according to six of them who asked not to be identified.
It also made for a late night for a fixed-income analyst at an international asset management firm and another such analyst at a hedge fund. They said that their bosses contacted them after the news, asking them to clarify the situation and explain their previous more positive recommendations on the perpetual securities.
While the market moves earlier 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.
Bloomberg reported earlier Monday that as of May 30 the company had received written commitments from banks for 60% of HK$87.5 billion of loan refinancing that it’s seeking by the end of June, according to people familiar with the matter. The developer said it expects to receive more commitments following the public holiday, they added.
New World didn’t immediately respond to a request for comment Monday.
The company also said Friday that total contracted sales year-to-date amount to about HK$24.8 billion, representing over 95% 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 skeptical after New World reported its first loss in 20 years for the financial year ended last June.
The builder had total liabilities of HK$220 billion, according to its latest financial report, including 17 regular bonds with US$3.44 billion in principal outstanding.
While it does not have any US dollar notes maturing this year, it has two Hong Kong dollar-denominated bonds with a combined US$168.6 million due in March next year.
“We believe there is a possibility of repurchasing senior bullet bonds to cut debt,” Nomura Holdings analysts wrote in a note on Monday, referring to the deferral as a credit negative move.
Separately, debt adviser PJT Partners Inc has been in talks with a group of New World bondholders since January, according to people familiar with the matter, adding that no immediate action is being planned.
New World is not the only casualty in Hong Kong of the broader property slump in both mainland China and the Asian financial hub.
Years of high interest rates and softening rents in the city are threatening the local commercial real estate sector, with no end in sight. The city’s prime office vacancies are set to increase, driving rents down by 8% to 10% this year, according to Colliers International Group Inc. That has put some heavily indebted smaller developers and local tycoons under severe liquidity pressure.
However, most of New World’s major rivals, including Sun Hung Kai Properties Ltd and CK Asset Holdings Ltd, are in a better position with a lighter debt burden.
The company’s stock is trading at a price-to-book ratio of just 0.07, with a market capitalisation of US$1.4 billion versus about US$17 billion at its peak in 2019.
