Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.In this Insight:<ol><li><a href='/entities/tata-motors-ltd' target='_blank' rel='noopener'>Tata Motors Ltd</a></li><li><a href='/entities/anton-oilfield-services-gp' target='_blank' rel='noopener'>Anton Oilfield</a></li><li><a href='/entities/china-south-city-holdings' target='_blank' rel='noopener'>China South City</a></li><li><a href='/entities/panda-green-energy-group-ltd' target='_blank' rel='noopener'>Panda Green</a></li><li><a href='/entities/gcl-new-energy-holdings-ltd' target='_blank' rel='noopener'>Gcl New Energy Holdings</a></li></ol>and more...

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.In this Insight:Tata Motors LtdAnton OilfieldChina South CityPanda GreenGcl New Energy Holdingsand more...

The Asia HY Trade Book for the month of November includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds in the Lucror Asia HY index.

  The Asia HY Trade Book for the month of November includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Book - November 2021 - Lucror Analytics

In this month’s "In-Focus" section, we discuss the crisis of confidence in the Chinese property sector. The current situation was precipitated by a series of events, beginning with the introduction of the Three Red Lines policy in 2020. We also provide an overview of recent bond defaults. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s "In-Focus" section, we discuss the crisis of confidence in the Chinese property sector. The current situation was precipitated by a series of events, beginning with the introduction of the Three Red Lines policy in 2020. We also provide an overview of recent bond defaults.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. 

Asia HY Monthly - Chinese Property - Crisis Of Confidence - Lucror Analytics

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Late last month, <a href="https://www.smartkarma.com/entities/modern-land-china-co-ltd" target="_blank" data-smartkarma-citation="entities:16899:1" rel="noopener">Modern Land China (1107 HK)</a> became the latest Chinese developer to miss a payment on a dollar bond. In an HKEx filing on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1026/2021102600163.pdf" target="_blank" rel="noopener">26 October</a>, Modern Land said that principal and interest payments on a US$250mn bond were “not met” by the 25 October deadline.
Modern Land had previously sought a three-month extension to the maturity on the bond, but later withdrew the proposal.  The company blamed the missed payment on “unexpected liquidity issues arising from the adverse impact of a number of factors including the macroeconomic environment, the real estate industry environment and the Covid-19 pandemic”.
Shares in Modern Land have been <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1021/2021102100209.pdf" target="_blank" rel="noopener">suspended</a> since the 21 October. 
<h3>The New News</h3>
<a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services Holdings (1516 HK)</a> intends to acquire a 32.22% stake in <a href="https://www.smartkarma.com/entities/first-service-holding-limited" target="_blank" data-smartkarma-citation="entities:34884:1" rel="noopener">First Service Holding (2107 HK)</a>, the completion of which will trigger an unconditional mandatory cash offer.
The Offer Price is HK$2.6167/share,  a 91% premium to the closing price of First Service prior to the trading halt on October 8.
Zhang Lei is currently the major shareholder of First Service with 51.39%. He is also the major shareholder and chairman of Modern Land with 65.38%. His holding in First Service will decline to 30% upon the completion of the agreements with Sunac Services. Proceeds from the sale of HK$843mn, which may be subject to revision, are expected to be used to repay Modern Land's debt.
This appears a knock-out Offer for First Service. It is Sunac Services' intention to delist the company, should 90% of disinterested shareholders tender.
Timing is the key issue. 
More below the fold.

Late last month, Modern Land China (1107 HK) became the latest Chinese developer to miss a payment on a dollar bond. In an HKEx filing on the 26 October, Modern Land said that principal and interest payments on a US$250mn bond were “not met” by the 25 October deadline.
Modern Land had previously sought a three-month extension to the maturity on the bond, but later withdrew the proposal.  The company blamed the missed payment on “unexpected liquidity issues arising from the adverse impact of a number of factors including the macroeconomic environment, the real estate industry environment and the Covid-19 pandemic”.
Shares in Modern Land have been suspended since the 21 October. 
The New News
Sunac Services Holdings (1516 HK) intends to acquire a 32.22% stake in First Service Holding (2107 HK), the completion of which will trigger an unconditional mandatory cash offer.
The Offer Price is HK$2.6167/share,  a 91% premium to the closing price of First Service prior to the trading halt on October 8.
Zhang Lei is currently the major shareholder of First Service with 51.39%. He is also the major shareholder and chairman of Modern Land with 65.38%. His holding in First Service will decline to 30% upon the completion of the agreements with Sunac Services. Proceeds from the sale of HK$843mn, which may be subject to revision, are expected to be used to repay Modern Land's debt.
This appears a knock-out Offer for First Service. It is Sunac Services' intention to delist the company, should 90% of disinterested shareholders tender.
Timing is the key issue. 
More below the fold.

Sunac Services' Offer For First Service (2107 HK) May Support Modern Land

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Loan Defaults and USD Bond Payments Set To Continue:  China Evergrande Group (3333.HK) [Evergrande] magically made another 11th hour interest payment of USD 47.6 mn to bondholders on Friday, October 29, 2021 – escaping another default by the skin of its teeth, just as its 30-day grace period with bondholders was about to end. While the market is worried about a China Huarong Asset Management (2799.HK) default crippling the country’s USD credit market, they too should understand that any bond default by Evergande likely roils this market as well; and*Watch Your Bank Risk: According to Bloomberg, Evergrande has already been in contact with its lenders to request loan maturity extensions, including: China Minsheng Bank (1988.HK), China Zheshang Bank (2016.HK), Shanghai Pudong Development Bank (600000.CH), and Citic Trust (267.HK).  There would appear to be a limited amount of budging by its lenders. Its main bank, Shenjang Bank (2066.HK) is also on the verge of announcing NPLs in the 20% plus range.

*Loan Defaults and USD Bond Payments Set To Continue:  China Evergrande Group (3333.HK) [Evergrande] magically made another 11th hour interest payment of USD 47.6 mn to bondholders on Friday, October 29, 2021 – escaping another default by the skin of its teeth, just as its 30-day grace period with bondholders was about to end. While the market is worried about a China Huarong Asset Management (2799.HK) default crippling the country’s USD credit market, they too should understand that any bond default by Evergande likely roils this market as well; and*Watch Your Bank Risk: According to Bloomberg, Evergrande has already been in contact with its lenders to request loan maturity extensions, including: China Minsheng Bank (1988.HK), China Zheshang Bank (2016.HK), Shanghai Pudong Development Bank (600000.CH), and Citic Trust (267.HK).  There would appear to be a limited amount of budging by its lenders. Its main bank, Shenjang Bank (2066.HK) is also on the verge of announcing NPLs in the 20% plus range. 

China Evergrande Group – Dodging Another Bullet

China

Modern Land (China) Co., Ltd. is a real estate development company. The Company develops residential and commercial projects with energy-saving architecture.

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Modern Land China (1107 HK)

Weekly Wrap - 21 Nov 2021

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and...

Lucror Analytics

Asia HY Trade Book - November 2021 - Lucror Analytics

The Asia HY Trade Book for the month of November includes a summary of our recommendations, as well as our high-conviction ideas. The report also...

Lucror Analytics

Asia HY Monthly - Chinese Property - Crisis Of Confidence - Lucror Analytics

In this month’s "In-Focus" section, we discuss the crisis of confidence in the Chinese property sector. The current situation was precipitated by...

Lucror Analytics

Sunac Services' Offer For First Service (2107 HK) May Support Modern Land

At HK$2.14/share, First Service is currently trading at a gross/annualised spread of 22.2%/128.1%, assuming late January completion. Or 39.6%...

David Blennerhassett

China Evergrande Group – Dodging Another Bullet

EVERGRANDE: Evergrande magically made another 11th hour interest payment of USD 47.6 mn to bondholders on October 29th – escaping default....

Thomas J. Monaco

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