Analysts warn of weak investor sentiment after Ocean Grand collapse and recent rating downgrades
Zhongshan-based developer Agile Property Holdings is planning to raise about US$200 million by selling bonds next month even as investor sentiment to high-yield bonds weakens in Asia, particularly China, market sources said, blaming last month's collapse of Ocean Grand Holdings and recent ratings downgrades.
Agile has hired HSBC and Morgan Stanley to arrange the sale, according to market sources. Both banks declined to comment. Agile chairman Chen Zhou Lin could not be reached for comment.
'The Fed's doing wonders and the market in the US is booming for August but that is not what we're seeing in Asia,' said a person familiar with the deal. The US Federal Reserve halted over two years of continuous interest rate increases at its last meeting this month which should have been encouraging for bond investors who tend to react negatively to a rising interest rate environment because it takes a bite out of the yield provided by fixed-income products.
But the market for China's high-yield debt does not look good in the light of recent events. 'There have been a lot of rating downgrades, including Hopson [Development Holding] and Panva Gas, there are question marks about Chaoda [Modern Agriculture] and Ocean Grand blew out,' said Dilip Parameswaran, the head of credit research at Calyon Corporate and Investment Bank.
The biggest blow to China's high-yield market came last month when Ocean Grand, an aluminium and chemical maker, defaulted on US$160 million in bonds it sold earlier this year as well as outstanding bank loans. That company entered provisional liquidation after more than 800 million yuan of corporate funds went missing.