Hong Kong’s New World Secures New Loans, Pays Down Debt in $4.5B Liquidity Boost

New World Development has completed HK$35 billion ($4.5 billion) worth of new loan arrangements and debt repayments since January, as the Hong Kong-based developer continues to reduce its leverage.

HKEX-listed New World has maintained an average interest rate of 1.1 percent over the Hong Kong interbank offered rate (HIBOR) on its US and Hong Kong dollar borrowings and secured two new long-tenure renminbi loans totaling RMB 2.6 billion at fixed rates of 2.9 percent and 3.0 percent, the company said.

“Given the volatile market environment, the Group continued with its treasury management strategy to reduce interest costs, extend debt durations and mitigate risks related to foreign exchange and interest rate fluctuations,” New World said in a newsletter on Monday.

The developer also refinanced a HK$9.25 billion syndicated loan related to the 2015 acquisition of three hotels in Hong Kong under its 50:50 joint venture with the Abu Dhabi Investment Authority (ADIA), with the loan amount now totaling HK$9.5 billion after the refinancing added HK$260 million in new money.

Strengthened Liquidity

New World’s new renminbi borrowings include a 15-year loan of RMB 2 billion at a fixed rate of 3.0 percent and a 10-year loan of RMB 600 million at a fixed rate of 2.9 percent, with the developer disclosing that more yuan-denominated loans are currently under discussion.

Those borrowings compare to recent domestic Chinese bank loans worth HK$910 million taken out at interest rates ranging between 2.8 percent and 3.6 percent, according to New World’s interim financial disclosures published in February.

“The successful loan arrangement reflects the Group’s solid financial management capabilities and the strong support it received from banks. The Group will continue to optimise its loan portfolio and seek low-cost onshore loans in order to effectively control financing costs and maintain a solid financial position,” New World said.

Originally set to be due this month, the facility under New World and ADIA’s joint venture will see its tenure extended as part of the refinancing, with the company declining to disclose the loan’s new maturity. The partners had been in discussions to refinance the loan since as early as January, with New World telling Mingtiandi that most of the company’s US and Hong Kong dollar loans have a duration of three or five years.

That facility had been taken out by the New World and ADIA joint venture in 2015 as part of its acquisition of a trio of hotels that had been held by New World – the Grand Hyatt Hong Kong, the Renaissance Harbour View and the Hyatt Regency Tsim Sha Tsui – for a total consideration of HK$18.5 billion.

Asset Divestitures

The funding moves form part of New World’s multi-year effort to cut its net gearing ratio to the “mid to high” 30 percent range by June 2027 from 49.9 percent as of December, with the builder having also raised its target for non-core asset disposals earlier this year to HK$8 billion from HK$6 billion.

The developer has divested HK$59.6 billion of assets in the last three fiscal years, including the D-Park mall in the Tsuen Wan area, the 695-key Pentahotel in Kowloon, and a 51 percent stake in a Cheung Sha Wan office project.

Those disposals also include a majority stake in NWS Holdings, New World’s HKEX-listed infrastructure and construction unit which was taken private in November 2023 by a vehicle controlled by the Cheng family, whose patriarch Cheng Yu-tung founded New World, NWS, and jewelry retailer Chow Tai Fook.

New World has also slashed capex and operating expenses, bought back some $630 million of bonds and perpetual instruments, and cut its dividend by 57 percent to shore up its financial position.