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Published on 9/20/2021 in the Prospect News Distressed Debt Daily.

China Evergrande bonds drop; contagion fears spread across markets; Greenland down

By Cristal Cody

Tupelo, Miss., Sept. 20 – Chinese real estate developer bonds sank further on Monday as default concerns over China Evergrande Group spread, sparking fears of a Lehman-type financial collapse.

The contagion fears over China Evergrande Group along with a hesitancy to act ahead of the U.S. Federal Reserve’s monetary policy announcement on Wednesday also kept high-grade issuers out of the primary market on Monday, a source said.

Stocks faltered, oil sank more than $1 and measured market volatility soared nearly 24% on Monday.

China Evergrande Group’s dollar bonds shed about 2 points to 5¼ points over the session with the paper now trading in the low to mid-20s bid area, according to a market source.

The 8¾% senior notes due 2025 (C/C/C) slid 3 points to 23¾ bid by the close.

Yields have been surging higher since June with the 8¾% senior notes yielding nearly 65% on Monday.

Shanghai-based real estate developer Greenland Global Investment Ltd.’s 5.6% senior notes due 2022 (Ba2/BB-) fell more than 2½ points to 82¼ bid on $3 million of paper traded on Monday, a source said.

“There is little doubt that Evergrande is going to fail,” Confluence Investment Management strategists said in a Monday note. “It has interest payments due today and later this week and has already indicated it won’t make them. As we have noted over the past couple of weeks, there are broadening ripple effects from the decline of Evergrande.”

Elsewhere in the distressed space, theater bonds were flat to softer as the number of U.S. deaths from Covid-19 reportedly surpassed the total from the 1918 flu pandemic.

AMC Entertainment Holdings, Inc.’s secured and subordinated notes were down about 2¼ points to over 3½ points on Monday.

National CineMedia, LLC’s notes were mostly unchanged after improving in the prior week.

China Evergrande lower

China Evergrande Group’s 8¾% senior notes due 2025 (C/C/C) slid 3 points to trade at 23¾ bid by the close, a market source said.

Secondary volume totaled $9.5 million.

The 10½% secured notes due 2024 declined 3½ points to 24 bid on $2 million of trading supply on Monday.

The Shenzhen, China-based real estate developer’s bonds are down more than 70 points since May.

AMC notes decline

AMC Entertainment’s 5¾% senior subordinated notes due 2025 (Ca/C) softened on Monday, trading down 3 7/8 points to 75 1/8 bid, a source said.

Volume totaled over $1.5 million.

The Leawood, Kan.-based movie theater chain’s 12% second-lien senior secured notes due 2026 (Ca/C) also were down 2¼ points at 93¼ bid.

CineMedia mostly flat

National CineMedia’s 5¾% senior notes due 2026 (Caa3/CCC+) traded mostly flat in the 77¼ bid area in thin secondary action on Monday, a source said.

The Centennial Colo.-based cinema advertising company’s 5 7/8% senior secured notes due 2028 (B3/CCC+) were last seen on Friday up about ½ point at 89¼ bid.

Distressed returns soft

The Chicago Board Options Exchange’s CBOE Volatility index climbed 23.55% by the close to 25.71.

Brent crude dropped $1.42 over the day. West Texas Intermediate crude oil benchmark futures for October deliveries settled down $1.68 to $70.29 a barrel.

The iShares iBoxx High Yield Corporate Bond ETF closed the day down 31 cents, or 0.35%, to $87.69.

Distressed index returns were soft on Friday.

The S&P U.S. High Yield Corporate Distressed Bond index total return posted at minus 0.03%.

Month-to-date total returns were 1.17% as of Friday, while distressed year-to-date total returns totaled 28.17%.


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