NWDEVL：一个负面惊喜

PLEASE READ THE AUTHORCERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGECoupon deferral at a sensitive timeNWD announced coupon deferral for 4 out of it 5 outstanding perps.Theamountof coupon payment to be deferred totaled USD77.2mn.The timing of the deferralis a surprise to us given the media reports on the positive progresses of loanrefinancing and target to close the refinancing soon.The next coupon paymentfor NWDEVL6 1/4 PERP will be on 7 Sep’25 with a coupon payment ofUSD40.6mn.In view of the latest developments,the coupon payment ofNWDEVL 6 1/4 PERP will likely be deferred.The key is whether the deferralisa negative surprise to relationship banksWe have been arguing since the discussions of the loan refinancing that NWDwillnot be able to redeem its perps before the completion of loanrefinancing.However, we do not expect NWD to defer coupon payments giventhe progress in loan refinancing as per media reports.Indeed, NWD faced thesame window to defer coupon payments in Dec’24 but chose to continue thecoupon payments then.Additionally, NWD just announced on 30 May’25 that ithad achieved over 95% of its contractsales and NCD target.To us, thekeyquestion is whether the coupon deferral will help convince banks to commit toloan refinancing through conserving liquidity or the deferral is as much a negativesurprise to NWD’s relationship banks as to us.The news flow on loan refinancingin thecoming few weeks will offer more clarity.Loan refinancing to be completed remains our base caseNonetheless, we expect the loan refinancing to be completed given our belief thatbanks are incentivized to roll over NWD’s loan, partly helped by the lower HIBORand progress in contract sales and NCD.1M HIBOR lowered from c4.6%beginning of the year to below 0.6% now.If the coupon deferral is a negativesurpriseto NWD’s relationship banks,the time table for competing loanrefinancing could be subject to more uncertainties and banks could be moredemanding on terms of loan refinancing.CMBI Credit CommentaryNWDEVL:A negative surprise (852) 3657 6235glennko@cmbi.com.hk(852) 3900 0801JerryWang(852)3761 8919CMBI Fixed Incomefis@cmbi.com.hk Coupon can be deferred, not skippedThe coupon of NWD’s perps can be deferred but cannot be skipped as banks’ AT1s.We understand that there isnolimit as to the number of times coupon can be deferred.That said, the coupon deferred will be “interestbearing”.Given the dividend stopper and “interest on interest”, we believe that resumption of stock dividend paymentand settling the deferred coupon are amongst the priorities of NWD and Cheng family although completing the loanrefinancing should be the top priority for the time being.Will NWD conduct LME on bonds and perps?We believe that completing the loan refinancing is NWD’s focus now.If the loan refinancing can be completed aspreviously reported, NWD will have very limited amount of ST debts in 2025 and 2026.With sharply lower HIBORand better sales momentum, NWD’s liquidity and refinancing pressure should be notably relieved.The big questionremains whether banks are surprised by the coupon deferral and if so, how’s the progress of refinancingwill beaffected.Given our base case of loan refinancing will be completed and next scheduled maturity of USD bonds onJan’27, we believethat NWD is under less pressure to conduct a holistic restructuring on its USD bonds and perpsin the near-term.If NWD can secure additional loans, such as the DB loan as reported, NWD could draw down theloans to buy back or tender offer the higher coupon-paying and lower cash price bonds and perps.Significant downside priced in, focus on better risk-return profilesNWDEVLs perps moved 3-31 pts lower after the coupon deferral withmovements ofdated bonds contained.Atcurrent levels, we believe that NWDEVLs have priced in significant downside.For bonds with dated maturities, wepreferNWDEVL 8 5/8 02/08/28foritshighest cash yield.For perps, we can no longer look at these on a cash yieldbasis.That said, we believe that NWDEVL 5 1/4 PERP offer better risk-return profile amongst the outstanding perpsgiventhelargest coupon step-up.NWDEVL 5 1/4 PERP shouldbe in a higher priority In case of any marketrepurchases and tender offers.Table 1: Bond profiles of NWDEVLSecurity nameISINMaturity/Next callNWDEVL 6 1/4 PERPXS1960476387First Call on 7 Mar'24NWDEVL 4.8 PERPXS2268392599First Call on 9 Sep'23NWDEVL 6.15 PERPXS2435611327First Call on 16 Mar'25NWDEVL 5 1/4 PERPXS2132986741NWDEVL 4 3/4 01/23/27XS1549621586NWDEVL 5 7/8 06/16/27XS2488074662NWDEVL 8 5/802/08/28XS2873948702NWDEVL 4 1/8 PERPXS2348062899NWDEVL 4 1/8 07/18/29XS2028401086NWDEVL 4 1/2 05/19/30XS2175969125NWDEVL 3 3/4 01/14/31XS2282055081Source: Bloomberg.CMB International Global MarketsLimitedFixed Income DepartmentTel: 852 3657 6235/ 852 3900 0801fis@cmbi.com.hkCMB International Global MarketsLimited (“CMBGM”) is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly owned subsidiary of China Merchants Bank) 2