Glorious Bonds Mixed After Coupon Paid as Moody’s Flags Concerns

Bonds of Glorious Property Holdings Ltd. were mixed Monday after the developer made a coupon payment Friday, as Moody’s Investors Service flagged concerns about a principal repayment due in October.

The builder’s $300 million of 13 percent notes due Oct. 25 dropped 0.6 cent to 78.9 cents on the dollar as of 1:03 p.m. in Hong Kong, according to prices compiled by Bloomberg. The company settled $19.5 million of interest Friday on the notes, Doris Chung, a public relations officer at Glorious, said by phone that day. Its $400 million 13.25 percent securities due 2018 rose 0.4 cent to 55.8 cents.

Investors got a reminder of the risks of investing in Chinese companies’ some $275 billion of dollar bonds outstanding when Kaisa Group Holdings Ltd. missed a grace period to pay $52 million of overdue interest on two of its notes earlier this month. That made it China’s first developer to default on dollar debt, and a prolonged property-market downturn is fueling concern more nonpayments could come.

“Despite Glorious’s payment of its 2015 coupon payment, fundamental concerns with the company’s operations remain,” said Stephanie Lau, an analyst at Moody’s in Hong Kong. “Ranked by sales, profitability and liquidity, it is one of the weakest among the rated issuers.”

Glorious doesn’t have any information at the moment on the principal payment due in October, Chung said today.

Shares Increase

The builder’s shares increased 1.8 percent to HK$1.15 as of 1:02 p.m. in Hong Kong. That pares their loss for the year to 4.2 percent.

Contracted sales at the developer plunged 45 percent to 4 billion yuan ($645.3 million) in 2014 with revenue dropping 48 percent, according to its annual results released on April 15. Cash and cash equivalents including restricted cash slid to about 1.4 billion yuan as of the end of 2014 from about 3 billion yuan at the end of 2013, according to the results.

“Glorious’s liquidity condition remains very stretched,” Moody’s Lau said. “The $300 million offshore debt due in October is still sizable in comparison to the company’s cash position.”

External auditor PricewaterhouseCoopers LLP noted “the existence of material uncertainties which may cast significant doubt about the Group’s ability to continue as a going concern,” in an extract of its report included in the April 15 company filing.

Delinquent Loans

Glorious, which according to its website focuses on developing properties in cities in the Shanghai region, Yangtze River Delta and northeast China, had missed scheduled payments as of Dec. 31 on loans of 149.6 million yuan in principal and 46.4 million yuan of interest, according to its annual results dated April 15.

Since the end of last year, the company also failed to meet repayment deadlines on 500 million yuan of principal and 397.3 million yuan interest on unspecified borrowings this year, it said, without giving further details. While the builder subsequently settled the bulk of the missed payments, it was still delinquent on 130.3 million yuan, it said.

“It is hard for Glorious to refinance the $300 million principal through normal funding channels,” said Rui Guo, a credit analyst at Mitsubishi UFJ Securities HK Ltd.

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