Sunac China made payments on a local bond, just a day after announcing a default on its dollar bond. Sources said that the developer sent initial planned payment to investors via the a trustee, under an 18-month extension agreed to by the bondholders. The bond in question was an RMB 400mn ($59mn) whose first principal payment was due on May 15. The above reinforces the market commentary on the sector where offshore holders are subordinated and local bondholders have better recourse.

Separately, Sunac was cut to Ca from Caa1 by Moody’s on expectations of “weak recovery prospects for Sunac’s bondholders” after the default on the coupon of its 7.95% dollar bond due 2023, post the expiration of its grace period. Moody’s notes that the event could trigger a cross default and accelerate the repayment of its other debt obligations. The developer is likely undergo a debt restructuring and may have to rely on asset sales or investments from potential investors to generate funds for debt servicing. However, high execution risks and uncertain recovery prospects add to further difficulty for creditors.

Sunac’s dollar bonds were lower with its 7.25% bonds due June 2022 down 0.9 points to 27.2.

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