Lenders lower New World's margin financing ratio

Staff reporter and Bloomberg

Some lenders have lowered the margin financing ratio of New World Development (0017) to 30 percent amid concerns over the financial health of the leading Hong Kong developer, according to reports.

Bank of East Asia (0023) was reported to have cut the financing ratio of New World's stocks and bonds from 40 percent to 30 percent, effective December 20, the Hong Kong Economic Journal reported.

CMB International Securities also decreased the ratio of pledged New World stocks to 30 percent, it said.

A foreign financial institution even excluded the stocks and bonds of New World from its margin financing list and suspended buying the developer's bonds for its clients.

The lenders made the changes due to the market changes and risk management, according to the report.

Controlled by the tycoon Henry Cheng Kar-shun's family empire, New World has been one of the most closely watched property firms in the credit market for its high leverage.

Its net debt to equity was 82.7 percent as of the end of last year, compared with 41.4 percent at rival Henderson Land Development (0012) and 21.2 percent at Sun Hung Kai Properties (0016), according to Bloomberg Intelligence.

Last week, the real estate firm was said to be in talks with banks to extend the due dates of some bilateral loans.

Despite a minor rise of 0.77 percent yesterday, shares of New World dived over 55 percent so far this year and more than 94 percent since the all-time high in 2007.