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Hong Kong property developer New World Development has secured two onshore loans totaling 1.4 billion yuan (US$193 million) this month to further reduce its funding costs, according to a source with direct knowledge of the matter.
Key Takeaways:
Loan Details:
- 12-Year Loan: 1 billion yuan at an interest rate of 3.1%.
- 15-Year Loan: 400 million yuan at an interest rate of 3.15%.
Financial Strategy: The new loans are part of New World's strategy to lower funding costs amidst high debt ratios in Hong Kong's property sector. The company declined to comment on the loan details.
De-Leveraging Focus: New World has been under scrutiny for its de-leveraging plan, given its high debt ratios. Despite some perpetual and longer-dated bonds trading at distressed levels, many have recovered from last year's lows.
Market Context: Banks in Hong Kong are reducing their exposure to the commercial real estate sector due to falling valuations and occupancy rates, leading to higher lending rates. The new yuan loans are pledged to New World's flagship K11 projects in mainland China.
Recent Financial Moves:
- Last month, New World announced an increase in yuan loans to reduce overall financing costs, raising two onshore loans totaling 2.6 billion yuan in the first six months.
- Including the new loans and other offshore refinancing, the developer has completed HK$10 billion (US$1.28 billion) in loan arrangements and debt repayments in July, following US$4.5 billion completed in the first half of the year.
Rising Financing Costs: New World reported earlier this year that financing costs from continuing operations rose 17% in the six months ended December 2023 to HK$2.5 billion due to increased interest rates.
New World's strategic move to secure yuan loans highlights its ongoing efforts to manage debt and reduce financing costs amidst a challenging property market.
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