Business as usual despite rumors, says New World

Reuters and staff reporter

Hong Kong-based property developer New World Development (0017) said yesterday that it continues to carry on business as usual, following "media rumors" about its operations and financial obligations.

Earlier this week, the company issued aclarification that it did not start discussions with creditors regarding a proposal to restructure its existing debt, following market speculations.

The company said it was aware of market rumors and speculations in relation to its operations, and that it was continuing to engage with its stakeholders.

NWD, which has the highest debt levels among its Hong Kong peers, said it refinanced about HK$17.76 billion of its bank loans since July 2024.

However, this is only a fraction of the HK$199 billion debt it held, according to JP Morgan data from July 2024.

The property developer has also been facing executive governance issues, with its former chief executive Adrian Cheng Chi-kong, grandson of the group's founding Cheng family,stepping downin September.

JP Morgan said the recent liquidity issues of NWD and China Vanke (2202) have once again sparked market concern.

It said the support of the parent company is crucial to prevent NWD from defaulting as it may open a pandora's box in Hong Kong's property market.

NWD's parent Chow Tai Fook Enterprises has a strong motivation to provide assistance, JP Morgan said. This is not only to defend the family's reputation but also to prevent the credit capacity of other companies under Chow Tai Fook Enterprises from being affected.

The bank believes NWD has a better chance of surviving but estimates both it and Vanke may require debt extensions or restructuring.

Unlike the mainland property sector, Hong Kong's property market has not seen large-scale defaults. If NWD defaults, it may force banks to tighten financing channels for other healthier developers, causing a ripple effect, it said.

The banking sector may also be affected and the Hong Kong Monetary Authority may have to intervene to ensure that there is no public default, the report added.

JP Morgan still maintains an underweight view on NWD and Vanke until liquidity pressure is eased and warns that any sentiment-driven rebound will be short-lived.