New World Development Co. said that it plans to defer coupon payments due in June on perpetual bonds, as a deadline neared for the cash-strapped builder to notify holders of its decision.
The company said it has notified all holders of two perpetual securities with scheduled coupon payments on June 9 and June 10 that it has elected a deferral, according to a Friday filing to the Hong Kong Stock Exchange. It added that it intends to defer payments on two other bonds originally scheduled later next month.
“The company continues to manage its overall financial indebtedness whilst taking into account the current market volatility and continues to comply with its existing financial obligations,” a New World spokesperson said.
While such moves typically don’t result in events of default, this will be closely watched by financial institutions engaged in multi-billion dollar loan talks with the company. The decision further highlights the firm’s liquidity pressure after it recently opted not to redeem a 6.15% perpetual bond before June 16, when the interest rate is set to jump to more than 10%.
New World has been racing to complete a HK$87.5 billion ($14.41 billion) loan refinancing deal and recently asked banks to finalize it by the end of June. The company so far has commitments of more than HK$35 billion for the deal, or about 40% of the total, Bloomberg reported earlier.
Failure to reach a deal could potentially lead to demands for immediate repayment. The repercussions would threaten both New World and many of the banks which are already suffering from a sharp rise in non-performing loans from commercial real estate.
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The company is also looking for more banks to join an up to HK$15.6 billion loan backed by its key asset, Victoria Dockside, Bloomberg has reported.
Controlled by the family empire of Hong Kong tycoon Henry Cheng, New World has one of the highest debt burdens of any Hong Kong developer amid a years-long property slump in the city and mainland China. Investors have become increasingly skeptical of the firm’s ability to manage its debt burden, particularly after it reported its first loss in 20 years for the financial year ended last June.
Home values in Hong Kong have fallen 28% from an all-time high in 2021 and have been hovering at the lowest levels since 2016 in recent months. Residential property development in Hong Kong and mainland China account for about half of the company’s revenue.
