Bond Market News

Yuzhou Group was downgraded to RD from C by Fitch on the back of the completion of an exchange offer on January 20 for two dollar bonds – its $340mn 6% bond due January 25 and $242.069mn 8.625% bond due January 23 that Yuzhou combined into new notes with a coupon of 7.8125% maturing in January 2023. The developer was given a recovery rating of RR4. Below are the recovery rating assumptions:

• 10% administrative claim
• 80% advance rate applied to trade receivables
• 30% advance rate to investment properties given rental yield was only 1.3%
• 60% advance rate to net inventory
• 50% advance rate applied to properties under development, net property, plant and equipment, JV net assets
• 70% advance rate applies to completed properties held for sale
• 90% advance rate to deposits/prepayments for land acquisitions
• No advance rate to excess cash

Yuzhou’s dollar bonds are lower with its 7.85% 2026s down 1.1 points to 19.38 cents on the dollar.

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