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Bond Market News
Sunac, Jiayuan Downgraded to B-, B by Fitch; Logan Cut to Caa2 by Moody’s
March 16, 2022
China Sunac was downgraded to B- by Fitch on the back of increasing uncertainty over the refinancing of onshore and offshore debt maturing over the next few months, alongside decreasing market confidence and falling contracted sales. Sunac raised long-term funding via share placements in January 2022, but capital markets have become largely inaccessible since then. It has RMB 17bn ($2.7bn) in onshore and offshore bonds due in 2022. While it had RMB 101bn ($16bn) in cash/cash equivalents at end H1 2021, only a proportion of this was located at the rated entity level, said Fitch. The rating agency believes that cash would have significantly decreased in 2021, after having to repay debt maturities amid falling contracted sales (down 27% YoY in H2 2021 and 26% YoY in January and February 2022). Sunac’s dollar bonds have dropped 8-10 points to trade at 13 cents on the dollar
Jiayuan Group was downgraded to B from B+ by Fitch due to continued deterioration in sales and an uncertain recovery. Jiayuan has a smaller scale and higher exposure to lower-tier cities than peers, thereby limiting operational flexibility. Jiayuan’s contracted sales are down 39% YoY in in January and February 2022 and dropped 25-30% in H2 2021. Capital market access remains weak and its liquidity has worsened. It had over RMB 3bn ($470mn) of unrestricted cash at end 2021 of which ~RMB 2.7bn ($420mn) is at the holdco level, just enough to cover 2022 payments of ~$430mn (excluding a local ABS payment of $56mn equivalent). While it is in the process of obtaining secured loans against two investment properties, execution risk still remains. Jiayuan’s dollar bonds were trading weak at 36-40 cents on the dollar.
Logan Group was downgraded to Caa2 from B2 by Moody’s due to refinancing risks, increasing risk of default and weakened contracted sales. The downgrade was similar to its rating action a week earlier when it cut Logan to B2 from Ba3.
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