Kaisa improves; Evergrande unchanged; Exela quiets after exchange; Transocean, PBF up

By Cristal Cody

Tupelo, Miss., Dec. 7 – Default fears in China’s property developer space continued to mount on Tuesday with Kaisa Group Holdings Ltd. facing $400 million of bonds due during the session.

Kaisa’s 9 3/8% senior notes due 2024 (C//CCC-) recouped 1 point in distressed trading after dropping 3¼ points on Monday.

Issuers including Kaisa, China Evergrande Group, Fantasia Holdings Group Co. Ltd., Sinic Holdings (Group) Co. Ltd., China Properties Group Ltd., Modern Land (China) Co. Ltd. and Sunshine 100 China Holdings Ltd. have missed bond payments since September.

China Evergrande’s notes were mostly flat after declining about 1¾ points to 9 points Monday.

A “default by the Chinese developer looks inevitable,” S&P Global Ratings said in a news release on Tuesday.

Market tone remained stronger as stocks climbed with the Nasdaq jumping over 3% by the close.

The Chicago Board Options Exchange’s CBOE Volatility index dropped nearly 20% to $21.89.

The iShares iBoxx High Yield Corporate Bond ETF added 47 cents to finish at $86.84 after picking up 36 cents on Monday.

Energy bonds gained as oil prices climbed more than $2 after rallying over $3 on Monday.

West Texas Intermediate crude oil benchmark futures for January deliveries jumped $2.56 to settle at $72.05 a barrel after adding $3.23 on Monday.

“Transocean, Pemex, all that is up,” a source said. “At least five unsecureds are up more than 2 points.”

Offshore driller Transocean Inc.’s 8% debentures due 2027 (C/CCC) traded 3¾ points better on the day at 72 bid.

Petroleum refiner PBF Energy Inc.’s 6% senior notes due 2028 (Caa1/B/B+) rose 2¾ points to 57 bid.

Talen Energy Supply LLC’s 10½% senior notes due 2026 (Caa1/CCC/B-) also saw modest gains on Tuesday after skidding over the past three sessions.

In other activity, Exela Technologies, Inc. wrapped up a distressed debt exchange of its 10% senior secured first-lien notes due 2023 (Caa3/CCC-) with closing of the offer expected on Wednesday.

The notes were last seen in the secondary market on Nov. 30 at 81 bid.

The paper, issued by Exela Intermediate LLC, climbed from early summer trading in the 43½ bid area.

Exela said that $912.66 million, or 97.6%, of the outstanding notes were tendered, leaving $22.84 million of the Irving, Tex.-based software and services company’s issue outstanding.

Evergrande flat

China Evergrande’s notes were mostly flat on Tuesday after declining about 1¾ points to 9 points in Monday’s session on reports that its offshore bonds will be included in a restructuring, a source said.

Evergrande’s 8¼% senior notes due 2022 (C/C/C) went out unchanged at 23 bid.

The notes dove 9 points in the prior session.

Evergrande faces “huge bullet maturities in 2022” totaling $3.5 billion, S&P noted in the release on Tuesday.

A demand by a creditor that China Evergrande repay $260 million of obligations under a guarantee “shows that the issuer's liquidity remains extremely weak” but will not likely constitute a default event yet, S&P said.

The Shenzhen, China-based real estate developer reported on Friday in a regulatory filing that there was no guarantee the group will have sufficient funds for its financial obligations.

Kaisa gains 1 point

Kaisa’s 9 3/8% senior notes due 2024 (C//CCC-) traded 1 point higher on Tuesday at 35 bid after sliding 3¼ points on Monday, a market source said.

The Shenzhen, China-based real estate developer has $400 million outstanding of 6½% bonds that matured on Tuesday.

Kaisa was downgraded in November following missed interest payments on its 11.7% senior notes due 2025 and 11.95% senior notes due 2023.

Talen slightly better

Talen’s 10½% senior notes due 2026 (Caa1/CCC/B-) rose ¼ point to 55¼ bid over the day, a market source said.

The issue dropped 2¼ points in secondary trading on Monday, following declines of 1½ points on Friday and 5¼ points Thursday.

Last week, The Woodlands, Tex., and Allentown, Pa.-based power company reported that it obtained a financing commitment for a $788 million first-lien facility due in 2024.

Fitch Ratings said on Monday that it placed the company and bonds on ratings watch negative and noted the facility will stabilize Talen’s liquidity profile but will adversely affect the ratings of its existing debt.

Distressed index positive

Distressed index returns were positive over the first session of the week.

The S&P U.S. High Yield Corporate Distressed Bond index’s one-day total return was 0.34% on Monday, down from 1.08% on Friday but above the minus 0.15% posted in the same session a week ago.

Month-to-date returns improved to 1.81% in the prior session from 1.47% ahead of the weekend.

Year-to-date total returns totaled 23.98% on Monday.

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