Asia Credit:News &views over the holidays
Global Cloud Exchange (GCX): Signals from parent RCOM continue to beconfusing as far as GCX is concerned. It initially planned to keep operating it,then there were talks about a sale, and now about equity raising. EconomicTimes also reported that Bharti Airtel has bid USD1.2 billion EV for GCX. Wefind both Bharti's interest and the amount surprising, and assign a very lowlikelihood to the deal going through. Our concerns around GCX remain on itsdeclining revenue profile and the age of its assets. However, given positiveevent risk, we are neutral on the bonds at this point. The 2019s are quoted at90/91, up ~5 points in the past couple of weeks.
澳门金莎娱乐网站， Indo HY supply: supply pipeline seems to be picking up with several namesalready in the press. Per Bloomberg, coal company Toba Bara and mediacompany Intermedia Capital (listed subsidiary of Visi Media) are reported aspotential candidates for USD bond issuance. Palm oil producer, SawitSumbermas, is also reported to revisit its plan for debut USD bond issuance in1Q18. Garuda is another name mentioned in the press (Bloomberg) as potentialissuer.
Jain Irrigation: Debtwire reported that German Express has withdrawn itsbankruptcy petition after Jain agreed to pay the entire amount demanded bythe operational creditor. The 2022s have underperformed since this bankruptcynews came out, which was never material in our view in the first place,however, it has now been put to rest for good. We had upgraded the bonds toBuy in our Outlook report.
MIE: announced on Dec 22 to sign an agreement to acquire 10% participatinginterest in the foreign contractors’ entitlement and obligations under theproduction sharing contracts for each of the Daan oilfield and the Moliqingoilfield for USD55 million. On one hand, higher implied valuation for Daan oilfield than our estimate is positive. On the other hand, this is negative fromliquidity perspective in light of upcoming 2018s maturity. Time seems to berunning out for MIE with 2018s maturing in early Feb-18. Our base caseremains potential restructuring for both 2018s and 2019s with a haircut. We dounderstand that one of the scenarios could be full redemption of smaller 2018s(USD181 million) though we assign only small chance to such a scenario andin any case such outcome should be negative for the bigger 2019s (USD315million) which comes for maturity in Apr-2019, in our view. We downgraded2019s to Sell in our 2018 outlook report.
Noble: announced on Dec 20 an extension of the RCF covenant waiver to May18, the maturity date on this facility. The last minute extension shows that thediscussions with RCF lenders likely continue to be difficult. It also reiteratedthe plan to treat all stakeholders fairly as markets await details on therestructuring proposal before ~USD40 million coupon is due on the 2020s onJan 29. Separately, coupon on the perps was skipped again on Dec 24 to nosurprise. We currently have a Hold across the Noble curve, given lack of transparency into ongoing restructuring talks, but think risk-reward is relativelyskewed to the downside at current levels, more so on the 2018s that aretrading ~10 points higher than the 2020s/2022s.
Tata Steel: finally approved the Kalinganagar expansion from 3mtpa to 8mtpa,which will take total company production capacity to 18mtpa. Expansion willbe completed over 4 years at a cost of INR235 billion. It simultaneouslyannounced an equity raising of up to INR128 billion via rights issue. We believethe equity raise demonstrates management’s commitment to maintain theright capital structure in light of organic & inorganic growth opportunities.
Separately, Bloomberg reported that the company is looking to raise approx.
USD5 billion through loans and bond to refinance debt at some subsidiaries.
The new debt will be backed by a letter of comfort from the parent. We havehighlighted moving from JSW Steel 2022s into Tata Steel 2024s as a potentialswitch idea in our Outlook report.
Vedanta: acquiring majority stake in AvanStrate, a Japanese manufacturer ofglass substrate for LCD panels for USD158 million. We see this as creditnegative, albeit not material to change our Buy call on the 2024s. See reportfrom last week for details.