By Clare Jim
HONG KONG (Reuters) – New World Development, one of the biggest property developers in Hong Kong, reported an interim net loss of HK$6.63 billion ($852.45 million) on Friday, following a prolonged property downturn and high interest costs.
The developer has struggled with a limited cashflow for the last three years and financial markets are nervous any deepening of its debt problems could trigger a crisis reminiscent of the one in mainland China that started in 2021 and led to scores of company defaults.
Investors are keen for an update from new CEO Echo Huang on the company’s progress in its plans for deleveraging, debt repayment and asset disposal.
New World has undergone two CEO changes in two months. Adrian Cheng, the third-generation scion of the founding family, resigned in September, raising concerns over its corporate governance.
The net loss for the first half ended in December, which counts only continuing operations, is mainly driven by impairment and fair-value losses.
That compares to a HK$502 million net profit a year ago and follows a record HK$11.8 billion net loss for the full 2023/2024 financial year.
New World flagged the loss last week.
Hong Kong developers enjoyed decades of growth until the property market, a pillar of the economy, was hit by a series of crises, including anti-government protests in 2019, COVID-19 and a slow economic recovery.
New World’s market value has shrunk to about $1.5 billion from $14 billion in mid-2019.
Higher interest rates are also hitting it harder than its peers because it has some of the highest net gearing in the sector, at 85% at end-June, following its rapid expansion in both Hong Kong and mainland China before the pandemic.
The developer had a total of HK$151.6 billion of loans and bonds outstanding as of end-June, with HK$41.6 billion of the debt due by June this year, while its cash level was HK$28 billion. It also had HK$36.3 billion of perpetual bonds, which typically pay more expensive rates.
The perpetual bonds are trading at between 28 to 56 cents on the dollar, reflecting an imminent default or a bond restructuring.
Its 6.25% perpetual bond has a $40.6 million coupon payment due on March 7, and the $345 million, 6.15% notes will have their coupon reset to around 10.5% if New World does not redeem the securities by June 16 this year.
($1 = 7.7776 Hong Kong dollars)
(Reporting by Rajasik Mukherjee and Clare Jim; Editing by Anne Marie Roantree, Muralikumar Anantharaman and Barbara Lewis)
