Sunac, Logan Group bonds rally; Kaisa mostly flat; 99 Cents, National Cinemedia lower

By Cristal Cody

Tupelo, Miss., Jan. 19 – Bonds in China’s distressed property developer space rallied on Wednesday following news reports that China will draft new rules to ease funding access for property developers.

Sunac China Holdings Ltd.’s offshore bonds climbed over 20 points with the 6½% notes due 2023 (B1/B) up 21½ points on $1 million of secondary supply.

Chinese property developer Logan Group Co. Ltd.’s 5¼% senior notes due 2023 (Ba3//BB) jumped nearly 11¾ points to just under 83 bid on $1 million of volume during the session, a source said.

China’s property developer bonds saw a lift on Wednesday but remained firmly situated in the distressed secondary market.

“Large parts of China's property bond market are still too risky for investors,” said Jerry Lucas in a 6-K filing and news release on Wednesday from Greifenberg Digital Ltd., a credit research firm focused on China’s fixed income market and part of Hong Kong-based Greifenberg Analytics. “Although bonds of some property companies with stronger balance sheet have risen in price today, more leveraged developers remain subject to very high default risk, according to our models.”

Kaisa Group Holdings Ltd.’s paper was mixed on Wednesday but remains weak since announcing in December that it defaulted on four bonds.

The space is expected to see a strong pace of defaults in 2022 following numerous defaults late in 2021 from issuers that included 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.

Market tone stayed soft with stock indices down a second day. The Nasdaq ended 1.15% lower after closing Tuesday off 2.6%.

The iShares iBoxx High Yield Corporate Bond ETF fell 8 cents to $85.59.

Oil prices were stronger again on Wednesday.

West Texas Intermediate crude oil benchmark futures for February deliveries rose $1.53 after adding $1.61 on Tuesday to settle the day at $85.43 a barrel.

Overall distressed secondary action was thin with heavier volume concentrated in higher-rated junk issuers, including GrubHub Holdings Inc. and Fertitta Entertainment LLC, formerly known as Golden Nugget LLC, a source said.

Discount retailer 99 Cents Only Stores LLC’s 99 Escrow Issuer Inc.’s 7½% senior secured notes due 2026 (Caa2/B-) were quoted down about 1¼ points at 77 bid on less than $1 million of secondary volume.

Cinema advertising company National CineMedia, LLC’s 5¾% senior notes due 2026 (Caa3/CCC) were modestly weaker in light trading on Wednesday but down over 1 point since Friday.

Sunac climbs higher

Sunac’s paper soared in the secondary market over Wednesday’s session, a source said.

Sunac’s 6½% notes due 2023 (B1/B) shot up 21½ points to 62 bid.

Volume was light with $1 million of paper changing hands in the trade.

The Tianjin, China-based property developer’s 7½% notes due 2024 (B1/B) jumped nearly 20 points to head out at 64 bid after ending Tuesday at the 40½ bid area.

Kaisa trades

Kaisa’s 9 3/8% senior notes due 2024 (C//C) traded about ½ point better from where the paper was last seen ahead of the holiday weekend at 19½ bid on Wednesday, a source said.

The bonds traded in December at 35 bid and in August in the 92 bid area.

Kaisa’s 11½% senior notes due 2023 (C//C) were quoted at 20½ bid, down from the 21¼ bid range the bonds last traded at a week ago.

The issue ended 2021 at the 25½ bid area after sliding from the 98 bid range in September.

The Shenzhen, China-based real estate developer reported in December that it did not make the payments due on its 6½% notes due Dec. 7, 2021, 11.95% notes due 2023, 11.7% notes due 2025 and 11.65% notes due 2026.

National CineMedia lower

In other distressed secondary trading, National CineMedia’s 5¾% senior notes due 2026 (Caa3/CCC-) were less than ¼ point weaker on Wednesday but down over 1 point since Friday at 75¾ bid, a source said.

The notes went out Friday at 76 7/8 bid.

S&P Global Ratings upgraded the company and its secured and unsecured paper on Jan. 12.

The Centennial Colo.-based cinema advertising company’s issue has mostly traded lower since declining from a 92 area handle in July.

Distressed index soft

Distressed index returns were soft in the first session of the holiday-shortened market week.

The S&P U.S. High Yield Corporate Distressed Bond index’s one-day total return on Tuesday was minus 0.34%, improved from minus 0.41% on Friday.

Month- and year-to-date index returns declined to 0.83% versus 1.17% on Friday.

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