Hong Kong Property Giant Wobbles: New World Delays Bond Payments, Triggers Market Shock
New World Development (NDVLY) just delivered another shock to already-nervous investors. On Friday, the Hong Kong property giant announced it will defer coupon payments on four perpetual bondspushing back roughly $77.2 million in payments originally due next month. The decision sent its 6.15% perpetual bondscheduled for a June 16 coupontumbling over 12 cents to just 49.9 cents on the dollar. While this kind of deferral doesn't trigger a technical default, it's a flashing signal: the firm is feeling the squeeze.
Warning! GuruFocus has detected 8 Warning Signs with NDVLY.
In a brief statement, the company said it's managing debt while navigating a volatile market. But the backdrop tells a more pressing story. Home prices in Hong Kong have dropped 28% from their 2021 peak and remain stuck at 2016 levels. Residential property makes up half of New World's revenue. After reporting its first annual loss in 20 years, the company now faces one of the heaviest debt loads among Hong Kong developersHK$210.9 billion, to be exact. And with another perpetual bond due for a steep interest rate reset next month, the pressure could intensify.
New World is scrambling to secure a HK$87.5 billion refinancing package before the end of June but has only locked in about 40% of that so far. It's also pitching a new HK$15.6 billion loan backed by its crown jewel, Victoria Dockside. If those deals fall through, the fallout could ripple far beyond the companyespecially for lenders already weighed down by rising defaults in commercial real estate. Investors are watching closely. What happens next could reshape Hong Kong's real estate risk landscape.
This article first appeared on GuruFocus.
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