New World touts US$4.5 bn in loans, debt payments since January as proof of funding health

New World Development (NWD), the conglomerate owned by one of Hong Kong's wealthiest families, said it has completed around HK$35 billion (US$4.5 billion) in "low-interest and long-tenure" loans and debt repayments since January.

NWD announced on Monday that it was able to secure multiple low-cost new loans to replenish its liquidity and increase the proportion of yuan loans to reduce overall financing costs. The average interest rate for its offshore loans was about 1.1 per cent above Hibor, the city's interbank offered rate, while the selected onshore yuan loans were set at fixed rates of 3.0 per cent and 2.9 per cent. The one-month Hibor currently stands at 4.64 per cent.

"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," the company said.

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The moves came as elevated US dollar interest rates have increased borrowing costs in Hong Kong, where the local currency is pegged to the US dollar. They also came amid sluggish sentiment in Hong Kong and mainland China's property markets.

The city's base rate remains at 5.75 per cent after the US Federal Reserve kept its target rate unchanged this month, with just one cut expected this year. The city's six major lenders kept their key lending and deposit rates unchanged, meaning mortgage borrowers and companies face a longer wait for relief from high borrowing costs.

NWD said more onshore yuan loans are under discussion after securing a 15-year facility of 2 billion yuan (US$275.5 million) at a fixed rate of 3.0 per cent and a 10-year loan of 600 million yuan at 2.9 per cent.

NWD also refinanced a hotel loan for a joint venture with Abu Dhabi Investment Authority for a total amount of HK$9.5 billion, of which HK$9.25 billion is the original loan amount and HK$260 million is new money.

The firm will continue to "optimise its loan portfolio and seek low-cost onshore loans" to control financing costs and maintain a solid financial position, it said.

Amid weak property demand and consumption behaviour in mainland China and Hong Kong, NWD said its gearing ratio may not see material improvement in the near term, according to a note from Morningstar on June 21.

"Nonetheless, [NWD] is more optimistic about the property market's secular trend, given lower interest rates and a revival in homebuyer sentiment prospects in both regions, which should enhance NWD's financial strength," analyst Jeff Zhang wrote.

NWD has set an ambitious target of reducing its gearing ratio to below 40 per cent by 2027, from the current level of around 50 per cent. Its net debt of HK$118.9 billion as a percentage of equity rose to 49.9 per cent in December from 48.7 per cent in June last year, despite measures to trim capital spending and administrative costs.

In March, NWD agreed to sell its D-Park shopping centre and associated parking spaces in Tsuen Wan to rival Hong Kong developer Chinachem Group for HK$4.02 billion.

In December, the company bought back 15 per cent of its offshore bonds, accepting US$610.3 million from notes tendered by investors through a public auction, according to a Hong Kong stock exchange filing.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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