New World loses more market value as developer strives to contain debt crisis

New World Development (NWD) can’t seem to catch a break. Two rounds of top management shake-up to tackle its debt load and the loss of blue-chip stock status are threatening to spiral into a crisis of confidence.

The stock slumped 1.2 per cent on Tuesday to HK$5.65, bringing the losses this year to more than 50 per cent while the benchmark Hang Seng Index advanced 17 per cent.

The highly indebted developer is said to have sent out a letter to its bank lenders, seeking a waiver on loan conditions, Debtwire reported last week, citing people it did not identify. The firm is seeking forbearance, after its net debt-to-assets ratio breached the 100 per cent threshold that may allow its lenders to recall their loans.

NWD did not immediately reply to a request for comment.

“Despite the company’s recent CEO change, deleveraging will still be a long process,” said Jeff Zhang, an equity analyst at Morningstar in Hong Kong. “It’s too early to say it will definitely default,” he said, adding that NWD also has other financing channels in mainland China, “so refinancing can continue for the time being.”

NWD had HK$123.7 billion (US$16 billion) of consolidated net debt on June 30, according to its annual report. At 55 per cent, its net gearing or debt-to-equity ratio ranked among the highest in the industry. Interest-bearing loans and bonds stood at HK$151.6 billion.