New World faces decision deadline on perpetual bond redemption
Many of Hong Kong’s builders continue to face challenges as the city remains mired in a deep property slump
[HONG KONG] The clock is ticking on New World Development as the indebted Hong Kong builder must decide whether to redeem a perpetual bond before a deadline that would trigger higher interest costs on the facility.
If the company does not redeem the US$345 million note before Jun 16, its interest payments will jump to more than 10 per cent from 6.15 per cent, according to Bloomberg calculations. The company has to give at least 30 days’ notice if it wants to exercise the option at a lower interest rate, so time is running out.
While waiting to redeem the note would mean higher interest payments, it would also give the company some time to improve its liquidity.
New World, controlled by the family empire of Hong Kong tycoon Henry Cheng, has one of the highest debt burdens of any Hong Kong developer and the company has been in discussions with banks since January as worries grow about its financial situation. Many of Hong Kong’s builders continue to face challenges as the city remains mired in a deep property slump.
Even after the deadline passes, the company can still redeem the perpetual bond, which trades below face value at around 68 US cents. It has another US$999 million perpetual note with a similar “coupon reset date” in June 2026.
New World also has upcoming coupon payments on four perpetual bonds next month.
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Investors are also closely watching three ongoing loan deals involving New World, totalling HK$103.1 billion (S$17 billion). The developer has sweetened terms of two loans it is seeking, using one of its most valuable assets, the Victoria Dockside complex, which it already pledged as collateral for another facility. BLOOMBERG
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