Zhenro plunges; Diamond Sports paper mixed as solicitation start postponed; TPC higher

By Cristal Cody

Tupelo, Miss., Feb. 14 – Zhenro Properties Group Ltd.’s dollar bonds plunged in secondary trading on Monday on growing refinancing and default concerns.

Zhenro’s 10¼% perpetual securities dropped 6 1/8 points to 28 7/8 bid by the close on $4 million of volume, a source said.

Overall market volatility continued to rise early Monday with the Fear Factor index up more than 7% on continued concerns of a Russian invasion of Ukraine before retreating from the morning’s highs by the afternoon.

The Chicago Board Options Exchange’s CBOE Volatility index was nearly 5% higher at 28.63 by the day’s close after climbing over 15% on Friday and almost 20% on Thursday.

The iShares iBoxx High Yield Corporate Bond ETF softened 14 cents to finish the day at $82.52.

Oil prices rallied another $2 after gaining about $3 on Friday.

West Texas Intermediate crude oil benchmark futures for March deliveries settled up $2.36 to $95.46 a barrel.

In other distressed secondary trading, Diamond Sports Group LLC’s notes were mixed with the company’s start of the solicitation of consents for an exchange offer postponed again.

TPC Group Inc.’s 10½% senior secured notes due 2024 (Caa2/D/C) rose 1 point in light trading with the issuer in forbearance until March 18 after missing a coupon payment this month.

Defaults eyed in 2022

The 2022 global corporate default tally now totals eight with the U.S. region leading the list with five defaults, still ranked at the lowest level since 2014, according to a S&P Global Ratings release on Monday.

Moody’s Investors Service said in a report during the session that it expects defaults to “rise modestly this year.”

The annual global default rate for speculative-grade companies is forecast to increase to 2.4% in 2022 from 1.7% in 2021 and down from 6.9% the year earlier.

Moody’s said it expects the hotel, gaming and leisure and business services sectors to have the highest default rates in 2022.

Fitch Ratings reported Thursday the U.S. high-yield trailing 12-month default rate stands at 0.3%, the lowest level on record dating back to 2001.

Trailing default volume totaled $4.3 billion, compared to the $71.1 billion amassed from February 2020 through February 2021.

Fitch said it expects a rise in defaults “next month” that could approach $3 billion of volume after TPC Group skipped its Feb. 1 interest payment and is in a 30-day grace period.

“In addition, Diamond Sports Group launched a long-awaited distressed debt exchange offering and remains the largest issuer on the Top Market Concern Bonds list,” Fitch said.

Zhenro drops

Zhenro’s 5.98% senior notes due April 13, 2022 (Caa1//B+) sank to the 27 bid area on Monday from where the issue was last seen near the 56¾ bid area in the prior week, a market source said.

The issue traded at the start of the prior week at 83½ bid.

The Shanghai-based real estate development company’s issue opened the year trading better than the 90 bid range.

Zhenro on Monday acknowledged the “unusual price and trading volume” on Friday in its shares listed on the Hong Kong Stock Exchange.

Zhenro said in an announcement the decrease in trading price and increase in volume of the stock “may be attributable to certain untrue and fictitious articles that have been published on the internet about the company and/or its controlling shareholder, Mr. Ou Zongrong.”

The company reported that, “Having made all such enquiries with respect to the company as is reasonable in the circumstances, the board confirms that the operations of the group remain normal, and the group continues to carry on its business as usual.”

Moody’s said on Monday it downgraded the issuer to B3 from B1 and its senior notes to Caa1 from B2 due to weakened operations, deteriorated funding access and “sizable” debt due in the next 12 months.

Diamond Sports mixed

Diamond Sports’ paper was mixed over the day, a market source reported.

The company’s 5 3/8% senior secured notes due 2026 (Caa1/CCC) were about 1 point lower at 42½ bid.

Diamond Sports’ 6 5/8% senior notes due 2027 (Ca/CC) traded about 1 point better at the start of Monday’s session before climbing over 3 points by the market close.

The notes were quoted going out at the 28½ bid area, up from the 25 bid area on Friday.

Company parent Sinclair Broadcast Group Inc. reported in a regulatory filing on Thursday that the start of the solicitation of consents for the exchange of its term loans and 5 3/8% senior secured notes due 2027 and 12¾% senior secured notes due 2026 was rescheduled to begin on Friday.

The starting period previously was set for Feb. 8.

The Chesapeake, Va.-based sports broadcast group announced on Jan. 13 a $600 million new money financing transaction and debt exchange of its term loans, as well as its 5 3/8% notes and 12¾% notes.

TPC notes up

TPC Group’s 10½% senior secured notes due 2024 (Caa2/D/C) were quoted 1 point better at 61 bid in light trading on Monday, a market source said.

The notes improved about 5 points over the past week.

TPC announced on Feb. 3 that the company is in forbearance until March 18 after it missed about $53 million of coupon payments due Feb. 1 on its 10½% first-priority lien notes and 10 7/8% first-priority lien notes due 2024.

The Houston-based chemical manufacturer entered into the forbearance agreement with Ad Hoc Group Ltd., which is providing it with $52 million of liquidity through a commitment to purchase additional senior secured priming notes due 2024.

Distressed returns weaken

Distressed returns ended the prior week lower.

The S&P U.S. High Yield Corporate Distressed Bond index’s one-day total return dropped to minus 1.19% on Friday, compared to minus 0.06% on Thursday, 0.47% on Wednesday, minus 0.14% on Tuesday and 0.38% at the week’s start.

Month-to-date total returns weakened to minus 0.63% versus 0.57% on Thursday, 0.62% on Wednesday, 0.15% on Tuesday and 0.29% at the start of the week.

Year-to-date returns declined Friday to minus 2.15% from minus 0.97% on Thursday, minus 0.91% on Wednesday, minus 1.38% on Tuesday and minus 1.24% on Feb. 7.

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