Fosun Dollar Bond Rally Cools as Liquidity Jitters Resurface
Published 18 October 2022 06:26:34.535 GMT
(Bloomberg) -- A relief rally in Fosun International Ltd.’s dollar notes has faded as focus shifts from the conglomerate’s $2.1 billion asset-sale plan to how it will repay a wall of maturing debt.
Fosun’s dollar notes were steady after climbing the most since June on Monday on a Bloomberg News report that the firm had agreed to sell its stake in Nanjing Iron & Steel United Co. for 15 billion yuan ($2.1 billion). Trading in the conglomerate’s shares was suspended in Hong Kong.
Despite the asset sale, Lucror Analytics’ assessment of Fosun remains negative because of tight liquidity at the holding company and refinancing risk, especially because almost half of its debt is short-term, senior credit analyst Trung Nguyen wrote in a note.
All eyes are trained on Fosun’s next move as Bloomberg Intelligence credit analysts including Dan Wang estimate that the company has $5.8 billion of offshore and onshore debt redemptions due in the next 12 months. Record defaults in China’s high-yield dollar bond market this year have shut most junk-rated issuers from the primary offshore market, squeezing their available funding channels and liquidity.
Fosun, which is controlled by Chinese billionaire Guo Guangchang, had 117.7 billion yuan of cash holdings as of June 30, versus total liabilities of 651 billion yuan, 40% of which were interest-bearing borrowings, according to the company’s interim report. Several of the group’s entities have been paring their stakes in other publicly-held businesses in recent months.
“We believe the company should enhance transparency by regularly publishing holdcokao financials, rather than just consolidated numbers that are almost meaningless for bond investors,” said Lucror’s Nguyen.
By Lorretta Chen