According to a UBS research report, New World Development (00017.HK) announced a debt exchange offer worth US$1.9 billion. Per the announcement, New World will issue up to US$1.6 billion in new perpetual capital securities and US$300 million in new notes to replace their respective existing securities.
UBS believes that, considering the 50% principal write-down and the discretionary nature of the 9% coupon distribution without compounding features, this exchange offer may not appeal to all existing perpetual capital securities holders. Assuming 100% participation, UBS estimates that US$1.3 billion of the existing perpetual capital securities would remain unexchanged. The bank expects New World Development to potentially launch a new round of liability management initiatives targeting the remaining US$1.3 billion in perpetual securities while concurrently planning an equity injection program.
UBS considers this exchange offer beneficial to shareholders. Assuming full participation, UBS estimates that New World could achieve a net debt reduction of HK$13 billion. Consequently, its adjusted net debt should decrease from HK$160 billion as of June 2025 to HK$147 billion, and the net debt-to-equity ratio should fall from 93% to 80%. Additionally, given that this exchange offer results in only an incremental cash interest expense of HK$1.2 billion, UBS does not anticipate a significant impact on New World’s cash flow. UBS maintains a target price of HK$4 for New World with a “Sell” rating.
