Moody's - Chinese property bonds take Asian covenant quality scores to all-time weakest level

Moody's

Sun, Jan 24, 2021, 8:39 PM24 min read

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<!DOCTYPE html> <html lang="" xml:lang=""> <head> <title>/nwsys/www/images/PBC_1262369</title> <meta http-equiv="Content-Type" content="text/html; charset=UTF-8"/> <meta name="generator" content="pdftohtml 0.36"/> <meta name="date" content="2021-01-24T20:35:31+00:00"/> <style type="text/css">  </style> </head> <body bgcolor="#A0A0A0" vlink="blue" link="blue">  <style type="text/css">  </style> <div id="page1-div" style="position:relative;width:918px;height:1188px;"> <img width="918" height="1188" src="http://mco.acquiremedia.com/images/PBC_1262369001.png" alt="background image"/> Research Announcement:  Moody's - Chinese property bonds take Asian covenant quality scores to all-time weakest level Singapore, January 25, 2021 -- » Weakest quarterly score takes Asia’s overall average to 2.91 (moderate) for January 2011 through December 2020 » Q4 high-yield bond issuance dominated by Chinese property bonds Moody's Investors Service says in a new report that the average covenant quality (CQ) score for Asian full-package high-yield bonds in Q4 2020 weakened to 3.63 (weak), a new all-time weakest quarterly score, from 3.48 (weak) in Q3 2020. A higher score denotes weaker covenant quality on Moody's 1.0 to 5.0 scale. “CQ scores for Asian bonds have steadily weakened over the past decade, with the weakening this quarter driven by Chinese property bonds which also reached an all-time weakest level of 3.73 (weak) from 3.53 (weak) in the prior quarter,” says Jake Avayou, a Moody's Vice President and Senior Covenant Officer. “Among the six subscores, we have seen both leverage and liens subordination deteriorate with both reaching their worst quarterly level,” adds Avayou. Five out of the eight full-package bonds issued in the quarter used an aggressively low fixed charge coverage ratio (FCCR) threshold of 2.0 times. Similarly, five out of eight bonds can secure credit facility carve-outs under the permitted liens carve-outs. All full-package high-yield bonds scored in the quarter were from repeat issuers. Chinese property developers dominated, accounting for seven of the full-package bonds and one of the three high- yield lite bonds. Indonesian mining company PT Indika Energy Tbk (Ba3 negative), the only Southeast Asia full- package bond in Q4, had the strongest score for the quarter at 2.99 (moderate). CQ scores for Asian bonds have weakened since 2011, with only 5% of bonds in the strong and good categories in 2020, compared to 82% in 2011, while 40% of bonds are in the weak and weakest category compared to only 9% in 2011. Asia’s overall CQ score still remains 30%, 14% and 9% stronger than the averages for North America, EMEA and Latin America, respectively. Subscribers can access the report “Covenants - Asia: Chinese property bonds take covenant quality scores to all-time weakest level” at:  http://www.moodys.com/researchdocumentcontentpage.aspx? docid=PBC_1259430 NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York <PhoneNo>+1-212-553-0376</PhoneNo>, London <PhoneNo>+44-20-7772-5456</PhoneNo>, Tokyo <PhoneNo>+813-5408-4110</PhoneNo>, Hong Kong <PhoneNo>+852-3758-1350</PhoneNo>, Sydney <PhoneNo>+61-2-9270-8141</PhoneNo>, Mexico City <PhoneNo>001-888-779-5833</PhoneNo>, São Paulo <PhoneNo>0800-891-2518</PhoneNo>, or Buenos Aires <PhoneNo>0800-666-3506</PhoneNo>. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com. </div>  <style type="text/css">  </style> <div id="page2-div" style="position:relative;width:918px;height:1188px;"> <img width="918" height="1188" src="http://mco.acquiremedia.com/images/PBC_1262369002.png" alt="background image"/> This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on  www.moodys.com  for the most updated credit rating action information and rating history. Jake Avayou VP-Senior Covenant Officer Corporate Finance Group Moody's Investors Service Singapore Pte. Ltd. JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Laura Acres MD-Regional Corporate Finance Corporate Finance Group Moody's Investors Service Singapore Pte. Ltd. JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Releasing Office: Moody's Investors Service Singapore Pte. Ltd. 50 Raffles Place #23-06 Singapore Land Tower Singapore, 048623 Singapore JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. 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To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, </div>  <style type="text/css">  </style> <div id="page4-div" style="position:relative;width:918px;height:1188px;"> <img width="918" height="1188" src="http://mco.acquiremedia.com/images/PBC_1262369004.png" alt="background image"/> arising from or in connection with the information contained herein or the use of or inability to use any such information. 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Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at  www.moodys.com  under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.” Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. 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Moody's - Chinese property bonds take Asian covenant quality scores to all-time weakest level

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