New World proposes additional US$3.8 billion for loan collateral

Hong Kong developer New World Development (0017) has proposed using US$3.8 billion (HK$29.64 billion) of additional properties as collateral to refinance bank loans maturing in 2027 and beyond, according to people familiar with the matter, as it looks to ease liquidity pressure.

The latest move follows an earlier proposal to pledge 25 property assets valued at US$15.3 billion to refinance US$7.7 billion in loans maturing this year and next. It brings New World’s total collateral package to US$19.1 billion.

The company has in recent days sent revised preliminary terms of the three-year refinancing deal to banks, requesting feedback by Friday, the people said, asking not to be identified discussing private matters.

Support from banks on the loan refinancing exercise will be crucial for New World, as the developer — controlled by the family empire of Hong Kong tycoon Henry Cheng Kar-shun — faces mounting pressure to cope with one of the highest debt burdens among the city’s developers in a challenging property market.

New World hasn’t indicated the total amount of bank loans coming due in 2027 and beyond, the people added. It had consolidated net debt of HK$123.8 billion as of June 30, according to its 2024 annual report.

For the maturities in 2025 and 2026, New World is putting forward a portfolio of 25 assets that include some of its marquee properties, such as New World Tower, K11 Art Mall and 11 Skies offices in Hong Kong, along with investment properties in mainland China, including Shanghai K11 Art Mall and Shenzhen K11 ECOAST, the people said. 

About half of the assets in the collateral package have already been pledged against other debts, leaving an unpledged value of about US$11.3 billion. This means a second-ranking mortgage will be offered to prospective lenders for the new loan, the people added.

For bank loans maturing in 2027 and later, K11 Shanghai Huaihai Middle Road and Rosewood Phuket are among the 13 assets in the collateral package, and most of the assets haven’t been pledged against other debt, the people said.

Valuations on the assets are determined based on market value for investment properties and book value for other properties, the people added.

New World didn’t immediately respond to a request for comment.

Bank of China (3988), DBS Bank and the Hongkong and Shanghai Banking Corporation are likely to arrange the jumbo refinancing deal.

Bloomberg