All Eyes on UK Referendum’s Result; Moody’s Downgrades Golden Eagle to B1/Neg

24 June 2016

Credit Markets Update

All Eyes on UK Referendum’s Result; Moody’s Downgrades Golden Eagle to B1/Neg

¨      APAC USD Credit Market: Asian CDS and IG spreads narrowed by c.3bps to 137.6bps and 213.0bps while HY was unchanged at 6.92%. Meanwhile, yields of benchmark Treasuries jumped c.4-9bps with 5y and 10y at 1.26% and 1.75% as market is awaiting results for the EU Referendum which is scheduled around afternoon Asian trading session. Over in the primary market, Hanrui Overseas Investment (NR/NR/BB+) received 1.6x BTC for its USD300m 3y bonds at 5.25% (IPT: 5.40%). Elsewhere, Golden Eagle Retail Group was downgraded by Moody’s to B1/Neg, from Baa3 following the breach of financial covenants under the CNY4.9bn offshore syndicated loan. Moody’s revised the outlook on KT Corp to positive driven by the expectation that financial leverage will gradually decline over the 1-2 years.

¨      SGD Credit Market: Sabana REIT rating withdrawn. The short-to-mid swap curve mildly rose by between 0.1-1.2bps, with the 2y and 5y closing at 1.51% and 1.88% respectively. Sabana REIT announced that it was withdrawing its S&P rating of BB+/Sta. This follows MAS’ ruling that allows REITs an aggregate leverage limit of 45% (from 35% previously) without a credit rating, with Sabana’s Total Debt/ Assets at 39.2% as of 1Q16. Flows tread quietly ahead of the Brexit results today, with selected papers such as HYFSP, SSREIT and VITSP closing tighter by around 5-8bps (according to Bloomberg).

¨      MYR Credit Market: Govvies moved sideways with the 3y and 10y MGS unchanged at 3.21% and 3.87% respectively. MYR gained to 4.0165/USD yesterday as earlier opinion polls favored UK remaining in the Euro. Moderate flows of MYR428m were seen in the corporate market. Top traded bonds exchanged hands near to previous levels including MEX II 4/34 (5.969%), Prasarana 2/23 (4.102%) and Prasarana 2/36 (4.762%). Meanwhile, RAM to evaluate the impact of the proposed merger by National Bank of Abu Dhabi (NABD) and First Gulf Bank (FGB), with the preliminary assessment showing that the merger will not have a rating impact on NABD’s AAA rating.