Debt cut plans lift New World Development, but analysts remain cautious

By Clare Jim

HONG KONG (Reuters) -New World Development's shares and bonds rallied connected Monday aft the large Hong Kong developer said it would summation currency travel and chopped debt, but analysts said a much factual deleveraging program is needed.

Its shares closed up 11.2% to HK$5.36, the highest since December 24. New World's marketplace worth has shrunk to astir $1.7 cardinal from $14 cardinal successful mid-2019.

After reporting an interim nett nonaccomplishment of HK$6.63 cardinal ($852.63 million) connected Friday, the institution said it plans progressive spot income and diminishing superior expenditure, and reiterated it was not discussing a holistic indebtedness restructuring plan.

With nett gearing rising supra 88%, New World has immoderate of the highest indebtedness ratios successful the sector, and the fiscal markets are disquieted immoderate deepening of its indebtedness problems could trigger a situation reminiscent of the 1 successful mainland China that started successful 2021 and led to scores of institution defaults.

"The interim nonaccomplishment was amended than expected," said Alvin Cheung, subordinate manager of Prudential Brokerage, referring the nett informing by the developer a week agone of a nett nonaccomplishment of up to HK$6.8 billion.

"But the stock terms successful the agelong tally volition beryllium connected however the steadfast volition chopped debt."

Despite the firm's erstwhile plus disposal and refinancing efforts, New World's nett gearing inactive roseate by up to 4 percent points successful the six months that ended successful December.

J.P. Morgan said successful a probe study that the worth of assets pledged for slope loans has risen by HK$8.5 cardinal to HK$97 billion, accounting for 36% of its full spot publication value, but it could inactive rise HK$93 cardinal successful loans by pledging each unsecured assets.

The brokerage besides noted the institution did not guarantee the marketplace it would regularisation retired a rights issuance to rise funds arsenic it did successful erstwhile net conferences.

New World's perpetual bonds besides firmed connected Monday, though inactive trading heavy successful distressed levels, with astir of them bid astatine 31 cents to 47 cents connected the dollar, according to information by Duration Finance.

Its 6.15% perpetual bonds, which volition person their coupon reset to astir 10.5% unless the steadfast redeems the securities by June 16, were bid astatine 69 cents, up from 56.5 cents connected Friday.

The institution did not springiness an update connected the redemption program astatine the net conferences, but it told analysts that a determination could beryllium made earlier June without a step-up of interest.

To accelerate sales, New World volition motorboat 2 projects successful mainland China successful coming months.

It announced connected Monday it plans to motorboat an bureau building, valued astatine 1 cardinal yuan ($137.37 million), successful its flagship task successful China's eastbound metropolis of Hangzhou this year.