New World asks banks to refinance HK$87.5 billion loans by June
The developer has been in discussions with banks since January, seeking to refinance its bank borrowings maturing this year and beyond
[HONG KONG] New World Development has asked banks to refinance HK$87.5 billion (S$14.4 billion) of its loans by the end of June, according to sources familiar with the matter, as the cash-strapped builder seeks to quickly shore up its liquidity.
The urgency stems in part from the expiration next month of a covenant waiver on New World’s existing loans, two of the sources said, asking not to be identified discussing private matters. If the waiver expires before a refinancing deal, some banks could demand immediate repayment, though that scenario is unlikely, the sources added.
The initial deadline for banks to finalise their commitments for the refinancing was set for the end of May. However, some lenders have indicated they need additional time to secure internal credit approvals, expecting that they will be completed within the next few weeks, the sources said.
The ongoing loan talks are one of the biggest refinancing efforts ever by a Hong Kong company. A successful deal would help alleviate liquidity concerns that have long dogged the company. However, if talks falter and a deal is not sealed, that would mean more uncertainties for New World and its bondholders, who could face greater repayment risks.
New World also has multiple bond coupon payments due in June that will be closely watched by investors. The builder had total liabilities of HK$210.9 billion at the end of December 2024 and in June it has at least US$116.6 million of coupon payments due, including on four perpetual notes.
“There is a high likelihood that New World will successfully reach an agreement with banks,” said Huan Li, co-founder of asset manager Forest Capital Hong Kong. It’s uncommon for lenders to force a company into default outright and if the negotiations fail, the company may proceed with a comprehensive debt restructuring, he added.
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New World did not immediately respond to a request for comment.
The developer has been in discussions with banks since January, seeking to refinance its bank borrowings maturing this year and beyond. In March, the company sweetened the terms of the loans, adding prized asset Victoria Dockside to a collateral pool that already had around 40 other properties in it.
New World recently decided not to issue a notice to redeem a US$345 million perpetual bond before a deadline that would trigger higher interest payments, though it can still call the note at the elevated rate. It has a US$999 million perpetual note with a similar “coupon reset date” in June 2026.
The 6.15 per cent perpetual notes have dropped 19 per cent so far in May to around 62 US cents on the US dollar, set for the sharpest monthly decline since January, according to Bloomberg-compiled data.
Current bond prices appear to reflect expectations that the perpetuals may not be called, though near-term interest payments – including step-up coupons – will be paid, Forest Capital’s Li added.
New World is separately seeking to raise an additional loan of as much as HK$15.6 billion using Victoria Dockside as a first-ranking mortgage. BLOOMBERG
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