Evergrande mostly higher; Country Garden, Kaisa rally; PBF softens; Diamond Sports up

By Cristal Cody

Tupelo, Miss., Jan. 21 – Distressed bonds in China’s property developer space capped the week off mostly stronger on Friday.

China Evergrande Group’s notes were mixed in light trading following the distressed property developer’s announcement that it is “actively looking for solutions.”

Evergrande’s 9½% senior notes due 2024 (C//C) rose over 5 points.

Chinese real estate developer Country Garden Holdings Co.’s 4.8% senior notes due 2030 (BB+/BBB-) improved 3 points following a convertible bond offering.

Kaisa Group Holdings Ltd.’s 11¼% senior notes due 2025 (C//C) rallied 5 points over the day.

Bonds in the space jumped midweek following reports China will draft new rules to ease funding access for property developers and mostly held onto gains over Thursday’s and Friday’s sessions.

“The China developer news is sending some of the issues up,” a source said. “Evergrande was not a big mover today.”

The junk space was slightly better on Friday, while overall market tone stayed weak as stock indices tumbled again. The Nasdaq dropped 2.72%.

The iShares iBoxx High Yield Corporate Bond ETF was up 1 cent at $85.44.

Crude oil prices softened.

West Texas Intermediate crude oil benchmark futures for March deliveries settled down 41 cents to $85.14 a barrel.

PBF Energy Inc.’s 7¼% senior notes due 2025 (Caa1/B/B-) shed about 1 point to the 79 bid area on Friday, a source said.

The Parsippany, N.J.-based petroleum refiner’s bonds went out about 2½ points lower on the week.

Overall distressed secondary action remains light so far in 2022, sources report.

“We had a decent amount of new issues yesterday,” a source said of junk issuance. “I imagine distressed will start to pick up soon with the Fed not just pumping cash into the economy.”

Diamond Sports Group LLC’s 12¾% senior secured notes due 2026 (Caa1/CCC) jumped 14½ points higher on Friday with $3.77 million of paper traded.

The notes are included as part of a planned debt exchange Diamond Sports announced last week.

Evergrande stronger

China Evergrande’s 9½% senior notes due 2024 (C//C) rose to 17 1/8 bid on Friday from 12 bid in the prior session, a market source said.

The issue went out over 5 points better on the week.

Evergrande’s 8¾% senior notes due 2025 (C//C) were not active after improving 1 5/8 points to 12½ bid on Thursday.

The company’s bonds have dropped about 70 points since the back half of 2021 as the issuer and subsidiaries came under stress amid overdue debt.

In December, Fitch Ratings and S&P Global Ratings dropped the Shenzhen, China-based real estate developer to default status following the end of grace periods on missed coupon payments.

Evergrande said in a regulatory filing on Friday that in view of the debt stress the company is experiencing, its risk management committee is “communicating with its creditors” and proposes to engage additional professionals to assist with the process.

Evergrande said those agents include China International Capital Corp. Ltd. and BOCI Asia Ltd. as financial advisers and Zhong Lun Law Firm LLP as legal adviser to assist the company in mitigating and eliminating the risks relating to its debts, following up with demands from creditors and “dealing with the debts issue on a fair and equitable basis.”

The statement came a day after an ad-hoc group of holders of Evergrande’s offshore bonds announced they planned legal action.

The investors said in a statement released Thursday by representatives Kirkland & Ellis and Moelis & Co. that there has been no substantive engagement with “offshore creditors to formulate a viable restructuring plan.”

The group reported they have retained offshore law firm Harneys for enforcement actions and said it is requesting Evergrande to provide full transparency on its financial position and liabilities and to refrain from further asset disposals without consulting the group.

Country Garden gains

Country Garden’s 4.8% senior notes due 2030 (BB+/BBB-) improved 3 points during the session to 83½ bid, a source said.

Country Garden announced on Friday that in the prior session it priced HK$3.9 billion, or about $501 million equivalent, of 4.95% secured guaranteed convertible bonds due 2026 with proceeds slated to refinance existing medium- to long-term offshore debt due within one year.

Country Garden said the proceeds will not be used to repay the Foshan, China-based real estate developer’s 7 1/8% notes due on Jan. 27, which instead will be repaid at maturity with internal resources.

Kaisa notes higher

Kaisa’s 11¼% senior notes due 2025 (C//C) rallied 5 points on Friday to 25 bid on $3 million of secondary supply, a source said.

The bonds went out about 5½ points better on the week.

Kaisa’s notes remain soft since the Shenzhen, China-based real estate developer reported in December that it defaulted on its 6½% notes due Dec. 7, 2021, 11.95% notes due 2023, 11.7% notes due 2025 and 11.65% notes due 2026.

Diamond Sports jumps

Diamond Sports’ 12¾% senior secured notes due 2026 (Caa1/CCC) hit 91¾ bid on Friday, up 14½ points on the day with $3.77 million of paper traded, a source said.

The company’s paper has been among the most active issues in the distressed secondary space in January after Diamond Sports and parent Sinclair Broadcast Group Inc. announced a $600 million new money transaction.

The Chesapeake, Va.-based sports broadcast group said Jan. 13 the transaction includes a $600 million first-priority lien term loan credit facility and recapitalization with various lenders and holders of the company’s existing credit facilities and 5 3/8% senior secured notes due 2027 and 12¾% notes due 2026.

On Wednesday, Moody’s Investors Service said the proposed exchange offer will likely be considered a distressed exchange if completed with the outlined terms.

Sinclair Broadcast Group Inc. tried three times unsuccessfully in 2021 to conduct a transaction.

Distressed index softens

Distressed index returns weakened on Thursday, according to the latest market data.

The S&P U.S. High Yield Corporate Distressed Bond index’s one-day total return was minus 0.21%, compared to 0.12% on Wednesday and minus 0.34% on Tuesday.

Month- and year-to-date index returns declined to 0.74% from 0.95% on Wednesday and 0.83% on Tuesday.

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