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Bond Market News
Sino-Ocean Downgraded to Caa2 by Moody’s
July 31, 2023
Sino-Ocean was downgraded to Caa2 from Caa1 by Moody’s. Its senior unsecured notes were cut to Caa3 from Caa1 and its perps to C from Caa3. This comes due to Sino-Ocean’s “weak liquidity and credit profile” and expectations of weakened support from China Life Insurance Co, its largest shareholder. The downgrade comes on the back of the developer’s consent solicitation to extend coupon payments on three of its dollar bonds. Moody’s said that Sino-Ocean’s one-notch rating uplift that was based on expected support from China Life Insurance no longer applies since the consent solicitation indicates that the insurer “would not provide extraordinary funding support”. The developer’s cash balances have more than halved in six months from $2.7bn in June 2022 to $1.3bn as of end-2022. The downgrade of its senior unsecured notes is due to structural subordination. Coupled with challenging market conditions and heightened refinancing risk, the outlook remains negative.
Sino-Ocean’s senior notes are trading at 9-12 cents on the dollar while its perp is at 3 cents on the dollar.
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