JPMorgan says NWD's controlling shareholder may need to provide liquidity support

Debt-laden New World Development's (NWD) controlling shareholder may eventually have to offer the firm liquidity support by either buying properties or providing loans if the developer cannot sell assets to other parties, according to JPMorgan.

But an injection of capital, as suggested by a recent media report, was less likely, the US investment bank said in a report on Tuesday.

NWD stock dropped on Tuesday after the property developer said it had not received a proposal from its controlling shareholder, the billionaire Cheng family, on a capital injection. NWD's shares fell 2.8 per cent to HK$6.87 at the close on Tuesday after ending Monday 6.8 per cent higher.

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"Save that the company is in discussions with respect to a loan facility led by Deutsche Bank as part of the company's ordinary course financing activities, the company has not received any funding proposal as alleged in the rumours," NWD said on Monday night.

On Monday, Bloomberg News reported that the family of Hong Kong tycoon Henry Cheng Kar-shun, the controlling shareholder of NWD, was willing to contribute about HK$10 billion (US$1.3 billion) and was seeking a partner that could provide a roughly similar amount for an equity stake. Blackstone and CapitaLand Group were among the firms engaged in the discussions, the report said. The two companies had also been in talks with NWD to buy some of its assets, it added.

JPMorgan said NWD's clarification did not rule out the possibility of a capital injection in the future, as it only said the company had not received a funding proposal at that point.

Even if there was a proposal, JPMorgan said it was sceptical about an equity injection. Since the family does not receive dividend payments from NWD, it would rather not buy more equity, the bank said.

"After the controlling family's purchase of NWD's stake in" NWS Holdings, an infrastructure unit that was renamed CTF Services last year, "the funding support from the controlling shareholder has only been of a small scale, and thus investors have been questioning the determination of the controlling family to save NWD", the bank said.

"Until more proof of that, we would stay cautious," it said.

"From a third-party investor perspective [Blackstone or CapitaLand], we see little incentive to acquire an equity stake given NWD's more than HK$180 billion of debt and continued net loss since the financial year of 2023," the bank said.

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"We believe that acquiring a stake in individual assets would be more feasible. From the Cheng family's perspective, we see a higher incentive to either buy high-yielding investment properties or offer shareholder loans to NWD."

In July, the Post reported that Airport Authority Hong Kong was in talks with NWD to get the 11 Skies project at the heart of Hong Kong's international airport back on track, several sources familiar with the matter said at the time.

The authority was considering the option of seeking a new partner to undertake and complete the work at the 11 Skies shopping centre, the sources said. The financial terms of the move were still under negotiation, they said.

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 © 2025 South China Morning Post Publishers Ltd. All rights reserved.

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