China Evergrande declines; E-House, Modern Land drop after downgrades; Team Health up

By Cristal Cody

Tupelo, Miss., Oct. 13 – China’s distressed property developer space continued to balloon on Wednesday with bonds from related issuers under pressure following ratings downgrades.

China Evergrande Group’s paper softened after the company reportedly missed a third round of bond payments due on Tuesday following missed bond payments in September.

China’s offshore real estate bonds remained mostly weaker following the downgrades by Moody’s Investors Services and S&P Global Ratings during the session.

E-House (China) Enterprise Holdings Ltd.’s 7.6% senior notes due 2023 (B+) were down 1 point in secondary trading.

Modern Land (China) Co., Ltd.’s 9.8% senior notes due 2023 (Caa3//B) traded with a 20 handle, down about 70 points since mid-September.

Greenland Global Investment Ltd.’s 5.9% senior notes due 2023 (Ba2/B) were not active but traded Tuesday nearly 5 points better from ahead of the holiday weekend.

Elsewhere in the secondary market, Team Health Holdings, Inc.’s 6 3/8% senior notes due 2025 (Caa3/CCC) recovered nearly ½ point on Wednesday after ending the prior week down 7½ points, according to market sources.

China offshore bonds weak

China Evergrande’s 8¼% senior notes due 2022 (C/C/C) fell 1½ points on Wednesday to 22¾ bid by the close, a market source said.

The notes had edged up ¼ point on Tuesday.

The Shenzhen, China-based real estate developer has entered into a 30-day grace period following missed bond payments in September and additional payments due Tuesday.

E-House (China)’s 7.6% senior notes due 2023 (B+) were down 1 point on the day at 59½ bid.

S&P dropped the Shanghai-based real estate transaction service provider’s ratings to B from B+ on Wednesday based on a likely higher debt leverage with weakening property sales.

Modern Land (China)’s 9.8% senior notes due 2023 (Caa3//B) traded sharply weaker at 20 bid in strong secondary volume, a source said. The notes were last seen in the secondary market in September at 90 bid.

Modern Land’s 11.8% senior notes due 2022 (Caa3//B) were active on Tuesday and traded with a 33 handle. The bonds have plunged from 95 bid in mid-September.

Moody’s lowered the real estate developer’s rating on Monday to Caa2 from B2 and the bond ratings to Caa3 from B3 following the issuer’s proposed consent solicitation to defer the repayment of part of its $250 million of notes due on Oct. 25.

Shanghai-based real estate developer Greenland Global Investment’s 5.9% senior notes due 2023 (Ba2/B) were last seen on Tuesday improved at 50 bid in light trading, a source said.

The notes went out Friday ahead of the long U.S. holiday weekend at 45½ bid.

S&P downgraded parent Greenland Holding Group Co. Ltd. on Wednesday to B+ from BB- based on impaired access to both onshore and offshore capital markets.

Team Health improves

In other secondary action, Team Health Holdings’ 6 3/8% senior notes due 2025 (Caa3/CCC) improved nearly ½ point on Wednesday, according to market sources.

The notes were quoted near the 90 bid area in thin supply after trading ½ point softer on Tuesday.

The issue ended the prior week down 7½ points on $21 million of secondary supply.

The Knoxville, Tenn.-based medical staffing firm is owned by Blackstone Group LP.

Distressed index positive

Distressed index returns opened the short market week at a positive 0.08% on Tuesday.

The S&P U.S. High Yield Corporate Distressed Bond index’s month-to-date total returns were minus 0.1% on Tuesday, while year-to-date total returns totaled 30.1%.

The financial markets were mixed on Wednesday as oil settled lower and stocks ended flat to better, though volatility declined as primary action quieted amidst earnings blackouts.

The iShares iBoxx High Yield Corporate Bond ETF improved 23 cents to $86.88.

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