Sino-Ocean’s dollar bonds dropped by over 2-5 points across the curve, following its downgrade by Fitch to B+ from BB-. The downgrade came on the back of a reduction in Sino-Ocean’s financial flexibility. While Sino-Ocean paid its USD 6.876% Perp’s coupon that it had chosen to defer on March 21, the initial deferment indicates weaker liquidity. This comes despite several asset disposals over the past year. Fitch believes that refinancing risks, especially for its bonds due 2024, have increased. Late last month, Sino-Ocean issued a profit warning, expecting ~RMB 15-18bn ($2.2-2.6bn) in losses for 2022 vs. a profit of RMB 27.3bn ($4bn) in 2021. Cash balances have plunged to RMB 4.6bn ($670mn) by end-2022 from RMB 14.6bn ($2.1bn) in mid-2022, further showing signs of lower liquidity and financial flexibility.

Sino-Ocean’s 4.75% 2029s fell the most, by over 4.8 points to 39.68, yielding 23.6%.

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