[HONG KONG] Shares of New World Development surged on Wednesday (Jul 2) after the cash-strapped Hong Kong property developer closed an HK$88.2 billion (S$14.3 billion) loan refinancing package earlier in the week.

The package, one of the largest ever in Hong Kong, concludes months of negotiations over a debt refinancing designed to bring the company back from the brink of default.

New World’s shares closed at HK$6.26, up 9.8 per cent. They resumed trading after a holiday in Hong Kong on Tuesday and provided the first stock market reaction since the successful refinancing was announced late on Monday.

Its 2027 bonds were bid at 71.751 cents on the US dollar, according to Duration Finance, up from 71.69 on Monday morning.

Financial markets are closely watching the city’s major developer’s attempts to increase cash flow and repay public debt, as any non-repayment could trigger a crisis reminiscent of the one in mainland China that started in 2021 and led to scores of property company defaults including former industry behemoth Evergrande, and weigh both on the property sector and the banking system.

New World, among the most indebted in the industry, said in a filing on Monday that it had refinanced portions of its existing offshore unsecured debt, including bank loans, through a new facility and had also aligned the terms of its remaining loan agreements.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

The new facility consists of multiple tranches of bank loans with different maturities, the earliest being Jun 30, 2028.

While the refinancing package provided New World some breathing room and removed near-term default risk, analysts said its liquidity stress would likely remain.

JPMorgan said in a report that the developer still faces other debts totalling HK$100 billion, and its annual interest expenses were estimated to be HK$8 billion to HK$9 billion, though the size could be less with the recent drop in interbank rates.

In an earlier move to conserve cash, New World said last month it would defer coupon payments worth US$77.2 million on four perpetual bonds scheduled for June.

Other highly leveraged and smaller developers are also battling with liquidity stress as home prices in the financial city have dropped nearly 30 per cent from a 2021 peak and office vacancy rates have risen to record highs.

Emperor International said last week HK$16.6 billion of its bank borrowings had become overdue or had breached certain loan terms. REUTERS