HONG KONG — June 2, 2025 — New World Development Co. Ltd. (HKG: 0017), one of Hong Kong’s largest property developers, has announced a deferral of coupon payments totaling approximately €71.5 million on four perpetual bonds due in June. The move has fueled concerns over the company’s liquidity and has rattled investor confidence.
Shares in New World tumbled 7.5% during early trading on Monday following the announcement, while the company’s 4.8% perpetual bond dropped to 19.09 cents on the dollar from 25.4 cents previously. Perpetual bonds, which have no set maturity date, are often treated as equity on balance sheets. Although deferring coupon payments on such instruments is not considered a technical default, it nonetheless signals financial distress and can erode market trust.
Debt Profile and Liquidity Strategy
As of December 2024, New World’s net debt stood at approximately HK$165 billion (€19.9 billion), with a net gearing ratio of 91%—one of the highest among Hong Kong developers. In response, the company is actively seeking a refinancing package totaling HK$87.5 billion (€10.5 billion), with over HK$35 billion (€4.2 billion) already secured.
According to analysts at UBS, the deferral will allow New World to conserve about HK$1.9 billion (€230 million) annually in interest payments, providing temporary relief to its cash flow. However, experts caution that deferring payments only delays a more profound restructuring or asset sale that may be needed to solve the underlying liquidity crisis.
Broader Market Implications
New World’s move reflects a wider challenge facing Hong Kong’s property sector. Since 2019, developers have struggled with sluggish sales, falling property prices, and higher financing costs. The company’s deferral follows a similar move by Road King Infrastructure, raising concerns of broader financial stress.
This echoes the 2021 property crisis in mainland China, where developer defaults triggered significant market disruptions. Although Hong Kong has so far avoided a full-scale meltdown, New World’s situation suggests that liquidity pressures could spread.
Investor Sentiment and Strategic Outlook
Despite achieving more than 95% of its annual sales target of HK$24.8 billion (€3 billion) across Hong Kong and mainland China, New World faces a challenging outlook. Analysts at HSBC and UBS highlight limited visibility on recovery, warning that without decisive action, the company may face further credit downgrades and asset sales.
Management has indicated plans to prioritize cash flow, accelerate property sales, and cut capital expenditure. Nonetheless, the deferred bond payments underscore the urgent need for liquidity management and additional financing to restore investor confidence.
Risks and Opportunities
Failure to secure liquidity or sell non-core assets could spark wider market fears and weigh on property prices. Other developers may face similar liquidity squeezes, leading to contagion and potentially a domino effect of downgrades in the sector.
On the positive side, lower interest rates, gradual economic recovery, and cautious bank support may help stabilize the market. However, developers will need to adapt to a more disciplined financial environment and prioritize debt management.
Conclusion
The deferral of €71.5 million in bond payments by New World Development highlights the financial stress weighing on Hong Kong’s real estate sector. While refinancing plans may provide short-term relief, the company faces tough choices ahead. Investors will be watching closely to see whether New World can navigate this crisis without repeating the mistakes that shook China’s property market just a few years ago.
