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Sunac Misses Bond Payment, Junk Bonds Fall: Evergrande Update

Zhenro’s Unit Investors to Vote on Repayment: Evergrande Update

Chinese developer Sunac China Holdings Ltd. missed its first payment on a dollar bond since concerns about the firm’s financial health emerged late last year. 

Once viewed as one of the survivors of Beijing’s sweeping clampdown on the embattled real estate sector, Sunac is at a debt-payment crossroads. China’s fourth-largest developer by sales in the first quarter of this year faces $1.6 billion of other offshore and local bond payments due through June, according to data compiled by Bloomberg. 

Chinese high-yield dollar bonds declined for a second day, as a three-week rally continues to lose steam amid a worsening Covid outbreak and fading optimism over policy support measures.

Sunac Misses Bond Payment, Junk Bonds Fall: Evergrande Update

Key Developments:

Chinese Developer Sunac Misses its First Bond Payment Deadline (4:14 p.m. HK)

Bondholders hadn’t received payment for a coupon initially due Monday, according to people familiar with the matter who asked not to be identified because they’re not authorized to speak about it. Sunac has a 30-day grace period to make payment and avoid triggering an event of default, according to the bond’s offering circular. 

Further obligations include three more interest payments due this month on dollar notes.

Sunac Misses Bond Payment, Junk Bonds Fall: Evergrande Update

Chinese Developer Agile Has Most Dollar Bonds Yielding Above 15% (3:26 p.m. HK)

The amount of dollar bonds from Chinese issuers yielding more than 15% now totals $85.8 billion, according to data compiled by Bloomberg. Agile Group Holdings Ltd. tops all issuers with 20 bonds on the list

Macau Casino Dollar Bonds Fall Amid Broader High Yield Declines (3:26 p.m. HK)

Macau casino operators’ dollar bonds fell Tuesday. SJM Holdings subsidiary Champion Path’s 4.85% note due 2028 dropped 0.7 cent on the dollar to 75.8 cents, according to Bloomberg-compiled prices as of 3:14 pm in Hong Kong. Wynn Macau’s 5.5% note due 2026 fell 1.2 cents to 86.2 cents, poised for a fourth day of losses.

China Developers’ High-Yield Dollar Bonds Fall (1:51 p.m. HK)

Chinese high-yield dollar bonds fell further Tuesday, with drops of 2-4 cents on the dollar in the property sector according to credit traders, as a recent rebound continues to fade. Times China’s 6.75% bond due 2023 dropped 4.7 cents to 57.2 cents as of 4:30 p.m. in Hong Kong, according to Bloomberg-compiled prices, on pace for largest decline since Feb. 17.

Top China Broker Sees More Hedging (12:03 p.m. HK)

A recent rebound in Chinese property bonds won’t last, and investors are adopting more hedging while diversifying through indexes, according to an executive at one of China’s top brokerages. 

“Because developers remain beset by a negative sales outlook and prolonged pandemic, the recent rebound in their bonds will be temporary,” said Yang Chen, executive director at the fixed income, currency and commodities department of CITIC Securities Co. Investors seeking steady returns should instead pay attention to bonds issued by local government financing vehicles, banks’ perpetual debt and index-linked products, she added.

China Developers Need to Change as Market Seen Shrinking: Paper (10:45 a.m. HK)

Property developers need to transform their growth model as their market potential declines, supply of low-cost housing increases and regulation on their financial health tightens, the Securities Daily said in a commentary. A consensus among China’s top 10 developers, as reflected by what’s been said at their earnings briefings, is market size will shrink to 10 trillion yuan ($1.57 trillion) in the next 5-10 years, the report said. 

Shimao Unit Proposes Private Yuan Bond Extension (10:22 a.m. HK)

A Shimao Group Holdings unit has proposed a one-year extension for a domestic private bond puttable this month, REDD reported, citing two sources briefed by bondholders. Shanghai Shimao Co. has proposed to pay 10% upfront cash for its 500 million yuan, 3.7% bond due 2023 and puttable on April 26, while extending the remaining principal by one year, according to REDD.

©2022 Bloomberg L.P.