(Bloomberg) -- New World Development Co. plans to redeem a perpetual bond and complete $1 billion of non-core asset sales as the Hong Kong-based property company tries to revive confidence in its financial health. 

New World told some investors on Tuesday that it would try to redeem its perpetual bond callable in March 2025, and that the coupon would be much higher than the company’s average funding cost of 5% if it forgoes the call option. The bond was indicated at 95.7 cents on the dollar on Thursday, according to Bloomberg-compiled data.

New World also said that it expects to complete the sale of HK$8 billion ($1 billion) of non-core assets by the end of the month, according to people briefed by the company. The company said it may soon provide an update on the details of the asset sales, which were conducted between July 2023 to June 2024, the people added.

The developer, controlled by Hong Kong billionaire Henry Cheng’s family, saw its bond prices fall to record lows last year, exacerbating liquidity worries. Those concerns eased in recent months after the Cheng family increased its stake in the developer and the company worked to shore up confidence through bond buybacks and a pledge to optimize its debt profile, though New World’s shares are still trading near an all-time low.

 

It has also teamed up with Chinese state-owned developers including China Resources Land Ltd. and China Merchants Shekou Industrial Zone Holdings Co. in the past year to develop the land plots it owns in Hong Kong’s New Territories to lower its capital investments in the projects.

Nonetheless, New World still faces challenges. As Hong Kong’s property sales lose steam due to high interest rates, it may find it difficult to offload homes quickly without significant discounts. It has a project of more than 1,300 units coming to the market soon, at a time when first-hand sales have slowed — transactions plunged by 46% in May from a month earlier despite price cutting by developers.

New World’s shares are down about 40% since the beginning of the year, while those of peers Henderson Land Development Co. and Sun Hung Kai Properties Ltd. have declined by less than 20%.

During the investor briefing on Tuesday, New World also said that it has secured a multibillion-yuan loan this year backed by its upscale K11 shopping mall in Shanghai, the people said. The builder has recently began using the funding method, the people said, after Chinese regulators promoted the use of commercial property loans to meet operating capital needs in the real estate industry. 

In total, New World’s investment properties are valued at HK$43 billion and are mostly free of debt, the people added. The average loan-to-value ratio of these assets is expected to be around 40%, though could be as much as 70% for some, the people said. 

New World didn’t reply to an emailed request for comment.

The builder has also refinanced a loan totaling HK$9.5 billion with Abu Dhabi Investment Authority for their joint hotel assets, the company said in a statement on its website Monday. 

(Updates with additional details throughout)

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