China property space weak; Times China, Kaisa, Sunac drop; PBF mixed; Envision flat

By Cristal Cody

Tupelo, Miss., Oct. 26 – Bond issues from China’s property developer space sank further into distressed territory on Tuesday as another company missed a bond payment.

Modern Land (China) Co., Ltd.’s offshore bonds were not active after Moody’s Investors Service and Fitch Ratings downgraded the real estate developer following a missed note payment due Monday.

The space has steadily weakened following China Evergrande Group’s missed bond payment in September and Fantasia Holdings Group Co. Ltd.’s missed debt payment earlier in October.

“Despite the fact that major developer Evergrande was barely able to skirt a formal default on its dollar bonds last weekend, the Modern Land default is a reminder that the broad real estate sector in China is at risk as the government clamps down after years of debt-fueled growth,” according to a Confluence Investment Management note on Tuesday.

“Along with the risks arising from the U.S.-China geopolitical rivalry and the Chinese government’s broader crackdown on the private sector, the real estate debt crisis is adding to investor caution regarding the outlook for the Chinese economy and the investability of Chinese assets,” the agency said.

Times China Holdings Ltd.’s 6¾% notes due 2023 (B1/B+) dropped 3 3/8 points to 5¾ points during the session.

Kaisa Group Holdings Ltd.’s bonds traded down about 2½ points with the paper now in the low 30s.

Sunac China Holdings Ltd.’s paper headed out down 2½ points.

Elsewhere, petroleum refiner PBF Holding Co. LLC’s notes were mixed and have been under pressure this month, sources report.

Oil settled higher on Tuesday.

West Texas Intermediate crude oil benchmark futures for December deliveries rose 89 cents to settle at $84.65 a barrel after ending Monday unchanged.

The iShares iBoxx High Yield Corporate Bond ETF finished up 2 cents to $87.01.

In other market activity, Envision Healthcare Corp.’s 8¾% senior notes due 2026 (Ca/CC) have declined about 5 points since mid-October.

Modern Land quiet

Modern Land announced on Tuesday that it did not repay the $250 million of 12.85% senior notes due Oct. 25, 2021 (Caa3) that matured on Monday.

The company’s 11.8% senior notes due 2022 (C//C) traded last in the prior week at the 25 bid range before the company requested on Oct. 21 that Hong Kong Stock Exchange trading be halted in its stock and debt securities, a source said.

The Beijing-based real estate developer also announced on Tuesday that trading will remain halted until further notice.

In the dollar market, Modern Land’s 9.8% senior notes due 2023 (C//C) were last seen on Monday up 2 points at 20 bid. The issue has plunged from the 90 bid range seen in September.

Modern Land said it is working with legal counsel and expects to engage independent financial advisers to structure a plan that considers the interests of onshore and offshore stakeholders.

Times, Kaisa, Sunac off

Times China Holdings’ 6¾% senior notes due 2023 (B1/B+/BB-) dropped 3 3/8 points to 5¾ points on Tuesday, a source said.

The Guangzhou, China-based urban development operator’s bonds were quoted off 3 3/8 points at 85 bid on $1 million of secondary volume.

Kaisa’s 9¾% senior notes due 2023 (B3//B) went out at 31½ bid, down 2½ points on $1 million of secondary supply.

The Shenzhen, China-based real estate developer’s 10 7/8% senior notes due 2023 (B3//B) were over 2½ points weaker and trading near the 32¼ bid area. Secondary volume totaled $2 million.

Sunac’s offshore bonds also fell during the session.

The Tianjin, China-based property developer’s 8.35% senior notes due 2023 (B1/BB-/BB) softened 2 3/8 points to 81½ bid with over $3.65 million of paper traded.

PBF 6% notes up

PBF Holding’s notes have been under pressure in the secondary market over the back half of the month, sources report.

PBF’s paper was mixed with the 7¼% senior notes due 2025 (Caa1/B/B+) down over 2 points to under the 74¾ bid range on nearly $5 million of paper traded.

The Parsippany, N.J.-based issuer’s 6% senior notes due 2028 (Caa1/B/B+) improved 1 3/8 points to 72 3/8 bid on $6 million of secondary supply on Tuesday.

Envision steadies

Envision Healthcare’s 8¾% senior notes due 2026 (Ca/CC) were quoted flat on the day at 66 bid, a source said.

The Nashville-based medical group’s bonds have declined about 1 point from where the issue was last seen in the prior week and about 5 points since mid-October.

Distressed returns up

Distressed index returns kicked the week off higher.

The S&P U.S. High Yield Corporate Distressed Bond index saw a one-day total return of 0.06% on Monday versus minus 0.02% on Friday and minus 0.45% in the same session a week ago.

Month-to-date total returns improved to minus 0.77% on Monday from minus 0.83% on Friday and minus 0.96% on Oct. 18.

Year-to-date total returns grew to 29.23% at the start of the week from 29.15% on Friday and 28.97% in the week-ago session.

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