Yuzhou Group said on Friday that had it repurchased $2mn of its outstanding 8.3% 2025s and $1mn of its outstanding 7.375% 2026s. After the buyback, the outstanding principal of the 2025s and 2026s stands at $486mn and $636.5mn respectively. While the size of the buyback was relatively small, the news sparked a 2-4% rally in its dollar bonds on Friday with its 7.85% 2026s leading the gains, up 4% to 81.8 cents on the dollar.
In March, Yuzhou warned of weaker earnings that led to a Moody’s downgrade to B1 from Ba3 and then reported a 97% drop in 2020 net profits and a subsequent downgrade by Fitch to B+. Their bonds were under pressure again in June as Evergrande’s concerns spilt over to lower rated peers. Yuzhou has been buying back bonds in an effort to quell investor concerns. On July 8, Yuzhou bought back $1mn of its 8.3% 2025s in the open market, its third repurchase this year, with the company saying the repurchases are an attempt to “send a positive signal to the market and investors”