China Evergrande, Sunac lower; Fantasia claws back losses; Midas bonds climb higher

By Cristal Cody

Tupelo, Miss., Oct. 6 – Bonds in China’s property developer space stayed mostly soft on Wednesday as debt default fears spread across the sector following China Evergrande Group’s missed bond payment last month.

China Evergrande’s 8¾% senior notes due 2025 (C/C/C) dropped 1 point.

Evergrande rival Sunac China Holdings Ltd.’s paper declined in light trading.

The Tianjin, China-based property developer’s 5.95% senior secured notes due 2025 (B1/BB-) fell 1½ points to 74 bid, a source said.

Fantasia Holdings Group Co. Ltd.’s 10 7/8% senior notes due 2023 (CC/C) improved after plunging on Tuesday after the company missed a bond payment due Monday.

Elsewhere, bonds from Midas Intermediate Holdco II LLC, doing business as Service King, soared over 8½ points on Wednesday.

In other issues, Talen Energy Supply LLC’s 10½% senior notes due 2026 (B3/CCC/B-) dropped 2 points during the session.

Evergrande lower

China Evergrande’s 8¾% senior notes due 2025 (C/C/C) fell 1 point on the day to 20¾ bid, a market source said.

The notes dropped about 2¼ points on Tuesday after treading water Monday at 24 bid.

The Shenzhen, China-based real estate developer has entered into a 30-day grace period following missed bond payments.

Fantasia better

Fantasia’s 10 7/8% senior notes due 2023 (CC/C) improved over 2½ points to the 21 bid area after sinking to 18½ bid on Tuesday, a source said.

The notes were last seen in the prior week at the 32 3/8 bid area.

Fantasia was downgraded by Moody’s, S&P and Fitch this week after the company missed the payment on its bond due Monday.

The China-based property developer has $1.9 billion of offshore bonds maturing through the end of 2022, according to Fitch.

Midas bonds jump

Midas Intermediate Holdco II’s 7 7/8% senior notes due 2022 (Caa3/CCC-) jumped over 8½ points to 99¼ bid by the close, a source said.

The bonds traded as low as 74½ bid in mid-August.

The Richardson, Tex.-based auto body repair provider’s notes saw nearly $3 million of paper traded on Wednesday.

Midas’ $700 million term loan lenders have reportedly hired financial advisers as the company faced a $15 million interest payment due Friday on the $375 million outstanding of 7 7/8% notes, according to a Fitch report.

The company, majority-owned by Blackstone Group LP, drew down the remaining $22 million on a revolving credit facility and chose to pay its September term loan interest payment in-kind instead of cash, Fitch said.

Service King initially skipped an interest payment on the 2022 notes in April 2020 but paid the coupon within the 30-day grace period, according to Fitch.

Talen bonds slip

In the distressed energy space, Talen’s 10½% senior notes due 2026 (B3/CCC/B-) skidded to 53 bid, down 2 points on the day, a market source said.

Secondary supply totaled $1 million.

The Woodlands, Tex., and Allentown, Pa.-based power company’s bonds have been pressured over the back half of the year. Talen announced in September that a subsidiary secured up to a $175 million strategic capital partnership with Orion Energy Partners.

Distressed index gains

Overall market tone remained soft on Wednesday with equities mixed and oil prices retreating from highs on Tuesday.

The iShares iBoxx High Yield Corporate Bond ETF softened 5 cents to end the day at $87.01 following a 4-cent drop on Tuesday and a 31-cent decline on Monday.

West Texas Intermediate crude oil benchmark futures for November deliveries declined $1.50 to settle at $77.43 a barrel.

Distressed index returns were positive over the past two sessions.

The S&P U.S. High Yield Corporate Distressed Bond index total return grew to 0.35% on Tuesday from 0.1% on Monday and minus 0.69% ahead of the weekend.

Month-to-date total return improved to minus 0.35% from minus 0.6% on Monday and minus 0.69% on Friday.

Year-to-date total returns rose to 29.9% on Tuesday, compared to 29.45% on Monday and 29.32% on Friday.

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