(March 27): Hong Kong developer New World Development Co has proposed using one of its most valuable assets, Victoria Dockside, as collateral for an additional loan of as much as HK$15.6 billion (US$2 billion or RM8.9 billion), according to people familiar with the matter, as liquidity pressure continues to mount.

The company sent proposed terms of the three-year loan to banks in recent days, the people said, adding that proceeds will be used for the prepayment, repayment, purchase or repurchase of the company’s existing debt, without elaborating.

Victoria Dockside, which houses luxury mall K11 Musea, is worth about HK$88 billion based on an assumed price of about HK$30,000 psf, according to Bloomberg Intelligence calculations. That would represent around 20% of New World’s HK$445 billion in total assets. 

New World, controlled by the family empire of Hong Kong tycoon Henry Cheng, faces one of the highest debt burdens among Hong Kong developers, as the city remains mired in a long property slump. The latest loan talks come as the company is still in discussions on two other potential loans, in a bid to refinance borrowings that are set to mature this year and beyond. 

A New World spokesperson said that the company continues to engage with its stakeholders, including its lenders and bondholders, and is discussing ongoing financing options in compliance with its debt obligations.

Victoria Dockside is New World’s flagship commercial complex located at the core area of Tsim Sha Tsui waterfront in Kowloon with a total gross floor area of approximately three million sq ft, also accommodating K11 Atelier, K11 Artus, as well as Rosewood Hong Kong and Rosewood Residences. 

The asset has been closely watched by both bank lenders and bondholders, as once it is pledged as collateral, other creditors would have less access to it in any potential negotiations.   

In earlier discussions, New World had proposed to pledge other assets valued at more than US$19 billion combined. That collateral package included the company’s headquarters, New World Tower in Hong Kong’s central business district, K11 Atelier King’s Road, K11 Art Mall as well as investment properties in mainland China. 

Recently, US-based alternative investment manager Ares Management Corp approached banks seeking to purchase their New World loan positions, in hopes of partaking in the company’s refinancing exercise. 

Uploaded by Tham Yek Lee