How Hong Kong property giant New World ran into trouble
A record HK$88.2 billion loan refinancing deal in June offers hope of a new start for the beleaguered company
[HONG KONG] Once a symbol of Hong Kong’s property-fuelled prosperity, New World Development has become one of its most visible casualties. After years of easy credit and unabated expansion, the property giant – once among the most deep-pocketed in the city – is facing a financial reckoning.
The first major hint of the company’s troubles emerged in 2024, when the developer reported its first loss in two decades. By mid-2025 its problems had deepened: net debt had reached about 98 per cent of shareholder equity, according to Bloomberg Intelligence, making it one of the most leveraged major developers in Hong Kong.
A record HK$88.2 billion (S$15 billion) loan refinancing deal secured by New World in June offered hope of a new start for the beleaguered company and the chance to stave off a broader economic crisis in Hong Kong, a city experiencing a yearslong downturn.
But in early November, New World proposed to swap some of its existing US dollar notes to as much as US$1.9 billion in new debt in an effort to improve liquidity – a sign the June refinancing deal did not help enough to stem the bleeding. As of Nov 7, the company’s shares had slumped about 87 per cent from their 2019 peak.
With about US$7.9 billion still in outstanding bond repayments and pressure to sell off some of its assets, New World’s – and Hong Kong’s – woes are not over.
What is New World?
Founded in 1970 by Cheng Yu-Tung, a former gold shop apprentice from mainland China’s Guangdong province, New World is one of Hong Kong’s “Big Four” property developers. The family-owned company has built scores of apartment blocks throughout the city and owns iconic assets including the sprawling commercial complex Victoria Dockside along Hong Kong’s famous harbour.
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A decades-long property boom propelled the Cheng family into the financial hub’s wealthiest echelons. Now worth US$31.7 billion, they are one of the richest families in Asia, according to the Bloomberg Billionaires Index.
Management of New World was gradually handed over to Adrian Cheng, the grandson of the founder, across the 2010s. He made his mark by infusing art elements into the residential towers and offices that New World built, as well as bidding for mega projects like the city’s largest stadium, the Kai Tak Sports Park.
Under his leadership, the firm transformed into a brand that appealed to the sophisticated middle class and amassed multiple trophy properties in town.
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But after overseeing the plunge of New World’s earnings into the red, Cheng stepped down as chief executive officer in September – a rare abrupt departure in Hong Kong’s property industry, where the biggest players are all controlled by families that carefully plan their succession.
Adding to the turmoil, his replacement, Eric Ma, only lasted two months before departing, and Echo Huang was promoted to the top job in November 2024.
Why did things go south for New World?
The company’s strategy of debt-fuelled expansion was not so much of a problem when the property markets in both Hong Kong and mainland China were booming.
However, Hong Kong’s real estate market entered an unprecedented downturn in 2021. The combination of anti-government protests several years before that, as well as a controversial national security law and strict Covid-19 restrictions that followed, prompted an exodus of local residents and made the international community think twice about the city’s business environment. This weighed on demand for residential and commercial properties.
Compounding those challenges, Hong Kong’s interest rates move in step with the US Federal Reserve. As the Fed raised rates across 2022 and 2023 to combat spiking inflation, elevated borrowing costs increased New World’s financial burden and made investments in real estate less attractive to regular homebuyers and investors.
Home sales and rental income from offices and shopping malls are a major source of revenue for developers like New World. But home prices in Hong Kong are hovering at their lowest in nine years and office rents have plunged 40 per cent since their peak in 2019.
Malls are also struggling with higher vacancies and lower rents, particularly as the slowdown in mainland China’s economy means there are fewer tourists visiting Hong Kong who are willing to splurge.
The rush to build more apartment blocks and skyscrapers during the height of the market has left a glut of properties that are further suppressing prices as demand slows.
New World’s mega projects – from mixed-use development Victoria Dockside to the city’s largest shopping mall, 11 Skies – now face a very different reality to when they were planned.
The company is also being squeezed by its relatively high exposure to the property market in mainland China, which has experienced a steep decline in home values over the past few years.
The mainland represented more than half of New World’s contracted sales for the 12 months through June 2024. For Sun Hung Kai Properties, another top firm in Hong Kong, just 30 per cent of its property sales came from the same region over this period.
How important was this refinancing deal to New World?
As of the end of 2024, New World had recorded around HK$210.9 billion in liabilities. Since January it had been attempting to refinance what wound up being HK$88.2 billion of its loans – one of the biggest refinancing efforts ever by a Hong Kong company – by the time the covenant waiver on its existing loans was due to expire on Jun 30.
The last-minute refinancing agreement pushes back HK$63.4 billion of loans that were originally due this year and next, extending the maturities for three years. This will help to alleviate the liquidity concerns that have long dogged the company.
Without refinancing in place, some banks could have, in theory, called in their loans. New World had pledged around 40 properties as collateral, including its crown jewel, Victoria Dockside.
For HK$24.1 billion in loans due in 2027 and beyond, the maturities remain the same, but New World will have to add some credit enhancements and put up additional collateral.
Has the deal helped New World?
Securing a record refinancing deal hasn’t ended New World’s liquidity woes. In September, the company turned to Deutsche Bank for a HK$3.95 billion loan – worth about 75 per cent less than it had initially sought, underscoring lenders’ growing reluctance to extend credit to the struggling developer.
By November, New World was again trying to cut down on its outstanding debt. It announced plans to issue US$1.9 billion in new debt through an exchange offer that included haircuts of up to 50 per cent on perpetual bonds – effectively asking bondholders to forgo some of the money New World owes them, in a move that would give the company a lighter debt burden and more breathing room.
The latest loan announcement came just weeks after New World reported a second consecutive annual loss – this time HK$16.3 billion – underscoring the depth of its financial strain.
Compounding New World’s problems is Hong Kong’s property downturn, which shows no signs of easing. The city’s housing glut is forcing developers to cut prices to attract buyers, eroding profit margins across the industry.
New World’s revenue from residential development fell 6.7 per cent in the year to the end of June, adding to its cash flow pressures.
What’s at stake for Hong Kong?
While these loans give cash-strapped New World more time to find a buyer for some of its developments, a potential fire-sale of its assets could still trigger a domino effect in the city’s property sector, putting further pressure on the already-fragile market.
A high-profile default or restructuring by a major Hong Kong real estate developer would deal a major blow to confidence. S&P Global Ratings suggests such a scenario would lead to sales of newly built residences halving in 2025 and prices falling by as much as 7 per cent.
That kind of decline in prices would hit other developers’ margins and their debt-to-Ebitda ratio – a measure of leverage – could rise as a result.
In addition, if Hong Kong home prices continue to drop this year, S&P anticipates funding conditions would tighten, triggering a credit squeeze.
Banks are one of the largest sources of funding for property developers, and such lending is highly correlated with home values.
Should New World fail to honour its latest debt obligations, most banks would likely see a sharp increase in their volume of non-performing loans – debt that is considered unlikely to be repaid – putting more pressure on their balance sheets.
The exact level of exposure of various banks to New World is unclear, but it is likely to be significant given New World is one of Hong Kong’s biggest businesses. BLOOMBERG
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