New World’s Cheng family weighs capital injection by year-end: sources
The plan under discussion would establish a joint venture to provide liquidity to the debt-laden builder
[HONG KONG] New World Development’s controlling shareholder, the billionaire Cheng family, is considering injecting capital into the debt-laden builder as early as the end of the year, according to people familiar with the matter.
The family of Hong Kong tycoon Henry Cheng is willing to contribute about HK$10 billion (S$1.6 billion) and is seeking a partner that can provide a roughly similar amount for an equity stake, said the people, who asked not to be identified discussing private matters.
The plan under discussion would establish a joint venture to provide liquidity to New World, the people added. The talks are ongoing and details about the deal’s size and structure could change.
Blackstone and CapitaLand Group are among the firms engaged in the capital injection discussions, the people said. The two companies have also been in talks with New World to buy some of its assets, Bloomberg News reported earlier.
New World’s shares extended their gains after the news, jumping as much as 10.3 per cent to HK$7.3 and putting them on track for their highest intra-day price in more than three weeks, according to Bloomberg-compiled data. Some of its US dollar bonds also rose by at least one cent, according to several credit traders.
Despite securing a record US$11 billion loan refinancing deal earlier this year, New World still needs more funding to help it cut debt and sustain its operations, as Hong Kong’s property sector remains in the doldrums.
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The company has been in talks over a potential Deutsche Bank-led loan deal, but missed a self-imposed target to complete the financing in mid-July. As of late last month, no bank has committed to the deal and parties involved expect the talks to drag on, the people said.
Some potential investors involved in the talks have asked that the family offer its holdings in the Hong Kong-listed property firm as a security to hedge against potential risks, or have demanded dividend returns for their equity investment, some of the people added.
It remains unclear if the family would agree to any of the conditions, they said. The potential investors are not willing to commit to a deal if the family will not provide capital, the people explained.
The Cheng family office and New World did not immediately respond to requests for comment. Blackstone, CapitaLand and Deutsche Bank declined to comment.
Octus reported last month that Blackstone and the Cheng family were considering co-investing about US$2.5 billion into New World, with options discussed for the investment in the form of preferred or ordinary equity.
While the Cheng family largely sat on the sidelines when New World was negotiating its loan refinancing with banks earlier this year, it did inject liquidity into the firm in 2023, when it bought out a subsidiary for HK$35.5 billion. The Chengs own about 45 per cent share of the builder.
New World’s debt crisis stems from an aggressive expansion that came just before Hong Kong was rocked by political turmoil, the pandemic and a prolonged real estate slump. The company’s net debt reached about 96 per cent of shareholders’ equity as of December, the highest among all major developers in the city, according to Bloomberg Intelligence.
New World is also seeking to sell a range of assets, including projects in mainland China and a mall near Hong Kong’s international airport.
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