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Bond Market News
Logan Cut to B2 and B+ by Moody’s and Fitch; Redco Downgraded to CCC- by Fitch
March 8, 2022
Logan Group was downgraded to B2 from Ba3 by Moody’s and to B+ from BB- by Fitch. The downgrades come on the back of increasing refinancing risks and an expected weakening in contracted sales. Logan has RMB 13bn ($2.1bn) in capital-market debt maturing or turning puttable in 2022. In comparison, it has available cash at the holdco level amounting to RMB 5bn ($790mn) at end-February 2022. Besides, access to capital markets for funding is poor. Contracted sales fell 44% YoY in January and by 11% in H2 2021. The rating agencies also note that negative news flows have also affected market sentiment in the developer, further impacting funding.
Logan’s dollar bonds were down with its 7% Perp down 4.5 points to 19.13 cents on the dollar.
Redco Properties was downgraded to CCC- from B+ by Fitch on the back of “narrow margin of safety over Redco’s ability to repay its offshore bond maturities in April and August 2022”. Fitch notes that while Redco has to use its own cash dur to capital market constraints, it is unclear how much cash will be available by April 2022 for bond repayment. Redco has $236mn in dollar bonds due in April 2022 and $305mn due in August 2022. Holdco cash is currently at RMB 2.15bn ($340mn), insufficient to meet upcoming debt maturities. Also, Redco’s contracted sales have fallen 19% in Q4 2021 and 10% in Q3 2021.
Redco’s dollar bonds were lower with its 13% 2023s down 3.3 points to 21.5 cents on the dollar.
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