New World Development Co has asked banks to provide a three-year facility backed by more than 20 of New World’s properties.
(Jan 21): New World Development Co has offered properties valued at US$15 billion (RM67.15 billion) as collateral for loan refinancing, underscoring the increasingly onerous funding conditions facing the billionaire Cheng family’s Hong Kong real estate empire.
The developer has asked banks to provide a three-year facility backed by more than 20 of New World’s properties to refinance HK$58.1 billion (RM33.41 billion) of unsecured loans maturing in 2025 and 2026, according to people familiar with the matter. That would leave fewer assets available for unsecured bondholders, who have dumped New World notes in recent days — sending some of them to deeply distressed levels.
Controlled by the family of Hong Kong tycoon Henry Cheng, New World has been embroiled in turmoil as investors question its ability to cope with one of the highest debt burdens among the city’s developers. New World is on its third CEO in the span of two months as Cheng attempts to stabilise the company known for some of Hong Kong’s most high-profile buildings.
The company is offering to pledge properties including its luxury serviced apartment K11 Artus, office building K11 Atelier King’s Road and New World Tower in Hong Kong’s Central business district as collateral for the refinancing exercise, the people said, asking not to be identified discussing private matters.
Offering collateral with a valuation double the size of the proposed loan could help New World gain support from lenders. Last February, Hong Kong’s banking regulator relaxed the loan-to-value ratio cap for commercial properties to 70% from 60%, in a bid to support the ailing property sector.
While the company said Monday that it isn’t in talks for any holistic debt restructuring, such a proposal, if successful, would give it some breathing room as a wave of maturing loans looms.
New World also won majority consent at the end of last month from bank lenders to relax a debt-level-related covenant on some loans, the people said. The covenant is related to the company’s gearing ratio, or its consolidated net borrowings to consolidated tangible net worth, the people added.
New World didn’t immediately respond to a request for comment.
New World’s bond prices were relatively stable on Tuesday, according to traders, after some of its dollar notes fell to their lowest levels since issuance the previous day.
Separately, UBS Group AG halted accepting some bonds and shares of New World as collateral for margin loans, according to people familiar with the matter. The private banking arms of Citigroup Inc and HSBC Holdings plc also stopped lending on New World securities some months back, said the people.
Late last year, the developer asked banks to postpone the due dates of some bilateral facilities, a move that deepened concerns over its ability to service its debt load.
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