Asia Credit Weekender:Monday Tidbits,HY Calls &Curves

From Sep to Dec this year, there are 27 bonds totaling USD9.5 billion(excluding perps) that are callable. Of these, we expect ~USD5 billion to becalled - USD3.5 billion in China Property space and USD1.4 billion in OtherHY (excluding China property).

    Looking further ahead, USD10.4 billion (23 bonds) of bonds are callable in2018 (excl. perps and also excluding bonds which are callable in rest of2017 but may not be called as discussed above), along with ~USD9 billionof hard currency maturities in 2018.

    Looking closely at the callable bond list, the table on the left in Figure 1comprises of bonds where YTC is more than YTM, implying markets arelikely not pricing a call. In our view, investors are perhaps underestimatingthe likelihood of call for HT Global 2021s.

    Similarly, the table on the right in Figure 1 includes bonds where YTM isgreater than YTC, implying bonds expected to be called. We agree withalmost everything here, with the exception of Lippo 2022s (callable in Apr-18).

    Separately, Ronshine 2019s and Oceanwide 2020s are both callable andputtable. We think both these bonds may not be called, but some investorsmay choose to exercise the put option, in which case the companiesshould be able to successfully meet the put.