New World Development (NWD), one of Hong Kong's wealthiest companies, is grappling with a severe debt crisis that has led to significant leadership changes and a strategic overhaul. The company has seen its CEO change twice in just two months, including the unexpected resignation of Adrian Cheng. Amidst these challenges, NWD has proposed pledging US$15 billion worth of properties to secure loans, as its total debt has ballooned to HK$192.8 billion, resulting in a staggering debt ratio of 92% as of June 2024. [ab15283d]
In a troubling sign for the company, bond prices have plummeted, trading at distressed levels, and UBS Group has ceased accepting New World bonds as collateral. The company's reliance on mainland China for 85% of its property development revenue has left it particularly vulnerable, especially as Hong Kong's real estate values have declined by HK$2.1 trillion since 2019. [ab15283d]
In a bid to stabilize its finances, NWD is attempting to sell its K11 Art Mall for HK$9 billion, but negotiations have been hampered by pricing disagreements. This situation is compounded by the fact that NWD reported its first loss in 20 years, highlighting the severity of its financial predicament. [ab15283d]
In a related move, CTF Services Ltd, the Cheng family's infrastructure arm, is looking to sell toll roads in mainland China valued at approximately US$2 billion. This decision comes as CTF engages in discussions with potential buyers, including Yuexiu Group, and considers splitting the assets into smaller sales to raise cash and focus on faster-growing sectors. [b64dda41]
While CTF has been divesting non-core assets and has seen its stock rise by 5.8% this year, NWD's struggles continue to mount. The company reported a HK$19.7 billion loss for the fiscal year ending June 30, 2024, and its total debt has surged to HK$220 billion. Newly appointed CEO Echo Huang Shaomei faces the daunting task of steering the company through these turbulent waters following Eric Ma's departure. [bdf19fee][ceef689a]
The contrasting fortunes of the Cheng family's ventures underscore the complexities of the current market landscape. As NWD attempts to recover from its losses, including the fallout from its State Pavilia project, which is set to offer 388 units for sale early next year, the financial maneuvers of CTF Services reflect a strategic pivot in response to the ongoing crisis. [75b1892a][8316906d]