Distressed bonds bounce back; China Evergrande, Tianji, PBF higher; Talen weakens

By Cristal Cody

Tupelo, Miss., Sept. 22 – China Evergrande Group’s bonds extended a rally on Wednesday, adding 2¾ points to 6 3/8 points, as the company tries to stave off a default.

The company’s dollar bonds rose about ½ point to 3¾ points on Tuesday after shedding about 2 points to 5¼ points on Monday.

Offshore real estate bonds were mostly better following reports Evergrande subsidiary Hengda Real Estate Group Co. Ltd. arranged to make an interest payment on an onshore bond due Thursday, according to a regulatory filing and market sources.

“On the back of news they’re paying the interest and a pending restructuring from the government, China Evergrande Group’s 8¼% 2022 notes went from 25ish to 30ish,” a source noted.

The 8¼% senior notes due 2022 (Caa2/CCC-/CCC) were better on Wednesday at the 30, 31 bid side.

The bonds gained 3¾ points to 29 bid on Tuesday.

Dollar bonds from Tianji Holding Ltd., the Hong Kong-based overseas financing arm of Hengda Real Estate Group, jumped nearly 5 points to about 7¾ points in light trading action, a source said.

The 11½% senior notes due 2022 (C//CCC) climbed over 7¾ points to 18½ bid.

Tianji’s notes headed out on Tuesday down 4½ points at 10¾ bid.

Market tone remained better on Wednesday after the Federal Reserve left rates unchanged but signaled it may taper bond purchases soon.

“Last December, the committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals,” according to the Federal Open Market Committee statement on Wednesday. “Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted.”

Stock indices climbed about 1%, while oil futures rallied more than $1.50.

West Texas Intermediate crude oil benchmark futures for October deliveries settled $1.74 higher at $72.23 a barrel.

“Everything was just coming back from the other day,” a source said. “It was a strong day in the market – everything was bouncing back to levels they were before the sell-off on Monday.”

PBF Holding Co. LLC’s notes were about 1½ points to 2½ points better on the day.

In other distressed energy issues, Talen Energy Supply LLC’s bonds gave back some gains on Wednesday but remained mostly stronger. The paper rallied about 1¼ points to 7¼ points on Tuesday after the company reported it secured up to $175 million of new funding.

“Talen’s unsecureds went from the mid-40s to the mid-50s,” a market source said. “That’s obviously good news. They were trading in the 60s not too long ago.”

Talen’s 10½% senior notes due 2026 (B3/CCC/B-) were ½ point softer on Wednesday but are now trading with a 56 handle after the bonds added 7¼ points on Tuesday.

China Evergrande up

China Evergrande Group’s 8¾% senior notes due 2025 (C/C/C) picked up 6 3/8 points to head out at 30 3/8 bid on more than $16.5 million of secondary action on Wednesday, a source said.

The notes have rallied back after sinking 3 points on Monday to 23¾ bid.

The Shenzhen, China-based real estate developer’s 10½% secured notes due 2024 rose 2¾ points to 27¼ bid in light secondary volume of $1 million on Wednesday.

The issue added ½ point on Tuesday after declining 3½ points on Monday.

PBF bonds better

PBF Holding’s 9¼% senior secured notes due 2025 (Ba3/BB/BB) rose more than 2 points to 93½ bid on heavy volume totaling $35.5 million, a source said Wednesday.

The Parsippany, N.J.-based petroleum refiner’s 6% senior notes due 2028 (B3/B) also improved 2½ points to 61¾ bid over the day. Secondary volume rose to more than $13.5 million.

Talen lower

Talen’s 6½% senior notes due 2025 (B3/CCC/B-) fell 1½ points to 52 bid on $3 million of paper traded on Wednesday, a source reported.

The notes jumped 7¼ points in the prior session.

Talen’s 10½% senior notes due 2026 (B3/CCC/B-) softened ½ point to 56¼ bid.

The issue picked up 7¼ points in the prior session.

The Woodlands, Tex., and Allentown, Pa.-based power company announced Tuesday that subsidiary Cumulus Growth Holdings LLC secured up to a $175 million capital partnership with Orion Energy Partners to fund its clean energy efforts and bitcoin mining venture.

Distressed index up

The iShares iBoxx High Yield Corporate Bond ETF improved 0.18% to close the session at $88.00.

Measured market volatility fell 14.33% by the close.

The Chicago Board Options Exchange’s CBOE Volatility index ended at 20.87.

Distressed index returns improved on Tuesday after Monday’s sell-off.

The S&P U.S. High Yield Corporate Distressed Bond index total return rose to 0.51% from minus 1% on Monday.

Month-to-date total returns increased to 0.67% from 0.16% at the start of the week.

Year-to-date total returns grew to 27.54% from 26.89% on Monday.

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