Hong Kong Developer Plans Creditor Haircuts in Bid to Shore Up Finances

Financially challenged Hong Kong property firm New World Development is offering its bondholders a deal. The company plans to swap existing debt for up to $1.9 billion of new debt that includes haircuts of as much as 50% on perpetual bonds. The offer would help the developer shore up liquidity amid persistent losses and possibly help it avoid bigger restructuring down the road. New World’s five perpetual bonds are currently trading between 40 cents to 55 cents on the dollar, according to data compiled by Bloomberg. One strategist deemed the terms “decent.”

Controlled by the billionaire Cheng family, New World continues to face financial challenges, even after completing an $11 billion loan refinancing deal. Earlier this year, the company decided to defer interest payments on four perpetual notes, postponing $77.2 million of debt obligations due in June. The deferral also sparked a jump in one of its perpetual bond’s interest rate to more than 10%.