Updated: Mar 20
China IG spreads tightened 15bp last week as Treasury yields rose, although developers Longfor and Vanke were yanked the other way by price declines in HY property as a slew of bad news hit the tapes and despite the Government’s efforts to comfort the market by saying that major developers’ M&A loans would not be included in China’s “three red lines”.
With a heavy redemption calendar for the property sector this month, Shimao is focusing on its ABS issues rather than trust loans, on which it missed payments . Shimao has set aside funds for the redemption of two domestic ABS issues and is seeking to extend the repayment of two more towards the end of the month.
Guangzhou R&F announcement of achieving a 96% tender success contained a barb. It said that the total settlement cash it had available for the tender could be closer to USD100m than the USD300m previously indicated, the catalyst for another slump in HY property bonds prices. Yuzhou Group was next to announce it is planning an exchange offer for some of its offshore bonds, while Golden Wheel Tiandi has a 30-day grace period for a missed coupon payment expiring this week.
There was some good news though. Logan Group is making payment on its maturing bonds, KWG announced it has funds for redemption of its notes on Tuesday, Longfor Group proposing offering up to CNY 5bn of corporate bonds and Zhenro Properties was granted a credit line of CNY9.14bn by Bank of China.
Monday morning’s high yield session focused on bad news again, down between 1pt and 4pts, despite equities being higher. Agile was down as much as 10pts on real money selling. Agile intends to sell 14 non-core properties to raise CNY 2.8bn ahead of the CNY 11.3bn of redemptions it has this year. Shimao actually bounced half a point, the ripple effect of a rally in onshore bonds, which were up +4 to +8pts. Distressed bonds such as EVERRE and KAISAG were down 0.5pt or so.
The new issue market was dominated by India last week. In IG Reliance Industries priced a US$4bn 3 tranche offering. The IG new issue space is expected to remain active as over $4bn of debt is maturing in Q1. In high yield ReNew Power affiliate priced $400mm 4.5% 2027 green bonds, adding to the 10 India renewable issues last year. KOROIL coming with a multi tranche deal tomorrow.