Signs of Credit Stress Mount at New World Development as Pledged Assets Surge, Margin Loans Halted
New World Development Co., a prominent Hong Kong real estate developer, is facing escalating credit concerns. The company has pledged approximately $15 billion worth of assets as collateral for loan refinancing, marking the highest such amount by any top Hong Kong billionaire family, according to Bloomberg's analysis.
New World, controlled by the Cheng family, has requested a three-year facility backed by over 20 properties to refinance approximately $7.5 billion of unsecured loans maturing in 2025 and 2026. This move highlights the challenging financing environment facing the company.
UBS Group AG, Citigroup Inc., and HSBC Holdings Plc have reportedly halted accepting some New World bonds and shares as collateral for margin loans. This adds to the pressure on the company, which has faced questions about its ability to manage its substantial debt burden.
Amidst this turmoil, New World has offered to pledge high-value properties including K11 Artus, K11 Atelier King's Road, and New World Tower for the refinancing. Offering collateral double the size of the proposed loan could potentially improve lender support.
Although New World has denied ongoing holistic debt restructuring talks, such a proposal could provide some respite amidst maturing loan obligations. The company has also secured consent from bank lenders to relax a debt-level covenant related to its gearing ratio.
Despite the recent stability in New World's bond prices, the company's financial stress remains a concern. Investors are closely monitoring the situation as the company navigates a challenging real estate market.