New World's debt recast is just the beginning
20/11/2025 24:00
The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Updates to add graphic. By Ka Sing Chan HONG KONG, Nov 19 (Reuters Breakingviews) - The crisis for New World Development 0017.HK is far from over. The Hong Kong property developer narrowly escaped its own “China Evergrande moment” in July when it secured a $11 billion refinancing with banks. Now the distressed group controlled by the Cheng family is trimming its balance sheet with a small debt swap. It's a step in the right direction but a much deeper restructuring may be hard to avoid. In a voluntary plan outlined this month, New World proposed to issue up to $1.9 billion of new debt in exchange for existing perpetuals and senior notes worth more than $3 billion. Although the offer requires bondholders to accept haircuts of as much as 50%, the new notes have higher coupons and improved security linked to the company's Victoria Dockside complex, location of the Rosewood, which recently took the number one ranking in the world's best hotels. Initial acceptances of the offer, the company said on Tuesday, will result in a $1.3 billion net reduction. The mini-rejig leaves much to be desired, however, including for HSBC, Bank of China and other lenders that backed its refinancing. Hong Kong’s commercial real estate prices have fallen more than 50% since 2021. Several of the city's weaker developers have already defaulted. Yet New World is sitting on about $20 billion worth of borrowings, of which $8.8 billion will be due in three years. It has more net debt, including perpetuals, than rivals Wharf 0004.HK, Henderson Land Development 0012.HK and Li Ka-shing's CK Asset 1113.HK combined. That leaves New World under pressure. Options for asset sales are limited now that it has pledged most of its best developments against borrowings. The Chengs were planning to inject up to $1.3 billion into their listed property flagship, Bloomberg reported in August, citing unnamed people familiar with the matter, and were seeking a partner to provide a similar amount as a capital infusion. Absent a broad-based recovery in the property market, New World has its work cut out. CONTEXT NEWS New World Development on November 18 said that initial acceptances of the company’s offer to restructure its outstanding perpetual notes and securities will result in a $1.3 billion net reduction of debt. The Hong Kong developer was proposing to issue new instruments worth more than $1.9 billion, implying more than $3 billion that could have been tendered. The final deadline for acceptances is in early December. The swaps will result in an effective haircut of around 50%. The company said the new instruments will have “an enhanced credit profile that is linked to Victoria Dockside”, referring to a commercial complex in Hong Kong's prime shopping district Tsim Sha Tsui. In June, New World refinanced HK$88.2 billion ($11.3 billion) of bank debt and in September it secured a fresh facility for an initial committed tranche of roughly HK$4 billion, secured by a “first-ranking mortgage” over Victoria Dockside. New World's shares have fallen hard on its debt problems https://www.reuters.com/graphics/BRV-BRV/dwvkqaxjovm/chart.png (Editing by Una Galani; Production by Aditya Srivastav) ((For previous columns by the author, Reuters customers can click on CHAN/ KaSing.Chan@thomsonreuters.com))