Agile Property bonds slump after dropping rights issue plan, S&P warning

2014-10-11

Oct 10 (Reuters) - Agile Property's decision to drop its rights offer plan and Standard & Poor's warning of a downgrade to its credit rating sent the bonds of the debt-ridden Chinese property firm spinning lower on Friday.

Its bonds due in 2017 and 2019 are yielding 14-17 percent, up from 10-12 percent at the start of the week, according to data from Tradeweb. A week ago, the bonds were yielding 7-9 percent.

Agile said last month that it planned to raise about HK$2.79 billion ($360 million) through a rights issue, joining a growing line of Chinese real estate firms seeking fresh funds to pay down debt and bolster their balance sheets as the country's property market falters.

Liquidity risks at Agile have remained elevated. The firm's first-half accounts showed its short-term debt of 14.7 billion yuan ($2.4 billion) far exceeded the free-to-use cash balance on its books, which stood at 1.3 billion yuan on June 30.

Trading of Agile's shares in Hong Kong has been suspended since Oct. 3. The real estate company has remained silent on the reason for the trading halt, fuelling speculation about its ability to service its debts.

"If the share suspension is related to a negative corporate development, it could result in multiple notches of downgrade, depending on the impact," S&P said on Thursday.

S&P said it could cut Agile's BB rating, which is already two notches below investment grade, if there was damage to the company's reputation and investor confidence resulting in adverse liquidity conditions and higher funding costs.

"A 200-basis-point increase in Agile's new borrowing costs could indicate such a deterioration," S&P said. "We could also downgrade Agile if refinancing risk increases for the company's maturing debt."

Agile officials were not immediately available for comment.

Adding to concerns about the impact of China's property slowdown, Moody's Investors Service late on Thursday downgraded the outlook for one of the country's largest developers, Evergrande Real Estate Group Ltd to negative from stable.

Moody's said Evergrande was facing increase refinancing risks. The stock fell 0.7 percent on Friday. (1 US dollar = 6.1322 Chinese yuan)