UBS Suspends Margin Loans for Select New World Development Stocks: What You Need to Know

UBS Group AG has stopped accepting certain bonds and stocks from New World Development Co. as collateral for margin loans. This decision aligns with similar actions from other banks, including Citigroup and HSBC, as they also paused lending on New World securities.

These changes in lending practices have emerged amid rising concerns about the financial stability of New World. The company is closely watched due to its high levels of debt, especially in a challenging property market. New World is under the control of the Cheng family, and recent developments have prompted question marks about its future.

On Monday, New World denied rumors of a “holistic debt restructuring.” They did, however, mention that they have offered properties valued at $15 billion as collateral for refinancing loans. This move highlights the tough financial conditions the company faces.

Prior to this announcement, New World had requested banks to delay some loan repayment dates late last year. Recently, some of its bonds experienced significant declines in value, marking one of the largest drops since they were issued.

Adrian Cheng, who had been CEO, stepped down in September after overseeing the company’s first annual loss in two decades. His successor has since been replaced as well, further adding to the company’s instability.

In Asia, wealthy clients often use leverage against their securities to invest. Banks evaluate security prices and credit ratings to set lending values. Over the past two years, many private banks have reduced margin funding for bonds linked to Chinese property developers due to the sector’s volatility. If banks cut the lending value to zero, clients must either provide cash or additional collateral. Otherwise, their securities could be liquidated.

Source link

UBS, New World Development, margin loans, collateral, property downturn