20220616-招银国际-FOSUNI__Change_recommendations_on_FOSUNIs_to_Hold_from_Buy_3页_462kb

报告摘要

CMBI Credit Commentary Summary - FOSUNI

Core Content

This credit commentary from CMBI Fixed Income Department provides an updated recommendation for FOSUNI, shifting from Buy to Hold. The analysis is centered around Fosun's ability to manage its short-term (ST) debt obligations and its exposure to the offshore bond market.

Key Points

Debt Structure and Refinancing Needs

Fosun's ST debt accounts for RMB 50bn, or 45% of its total Holco debt of RMB 112.2bn as of December 2021.
55% of holdco debts are public bonds, and 60% are offshore debts, indicating significant exposure to both onshore and offshore refinancing requirements.
The company faces challenges due to the prolonged weakness in the offshore bond market for Chinese private sector entities (POEs).

Liquidity and Asset Disposal

As of December 31, 2021, Fosun had RMB 10.6bn in cash and RMB 36bn in liquid financial investments at the holdco level, which can be used for short-term debt repayment.
Fosun has identified over RMB50bn in market value non-core/financial assets for disposal, with majority unencumbered.
The Meadowbrook Insurance Group is expected to be sold by the end of 2022, generating USD 740mn in cash.

Refinancing Activities

In March 2022, Fosun International refinanced a USD 660mn syndication loan with a USD 870mn loan at a 70bps lower interest margin, extending the maturity to 3 years.
Fosun has arranged USD 200mn–300mn in new bank loans to refinance upcoming offshore bond maturities:
- USD 379.8mn puttable bond due on August 17, 2022
- EUR 382mn Euro bond due on October 9, 2022
For an onshore bond of its subsidiary Forte Land (RMB 3bn), Fosun has prepared to refinance using Shanghai Yuyuan's shares as collateral.

Banking Relationships and Credit Support

Fosun's strong banking relationships support its ability to refinance both onshore and offshore debt.
Chinese banks and asset managers are major onshore bond investors, which helps Fosun maintain access to funding.
The company has successfully refinanced onshore bonds with short-term notes in 2022, and is expected to continue this strategy for future maturities.
Two onshore puttable bonds (21 复星 05 and 20 复地 02, totaling RMB 2.66bn) did not trigger a put back to Fosun in March and June 2022.

Rating Outlook

CMBI anticipates a negative rating action from S&P following the August 2022 interim results, following Moody's recent negative rating action.
This highlights credit risk concerns and the potential for downgrade due to financial stress and market conditions.

Conclusion

Fosun's credit profile is mixed, with sufficient liquidity and strategic asset disposal efforts to meet short-term debt obligations. However, the high ST debt ratio, ongoing refinancing needs, and negative rating outlook suggest a cautious stance. The recommendation to Hold reflects the lack of catalysts for outperformance and the increased credit risk in the current environment.

Important Disclosures

The report is not investment advice and should be used for informational purposes only.
Past performance is not indicative of future results.
Investors should consult professional advisors before making decisions.
The report is intended for specific recipients and not for public distribution.
CMBIS may have conflicts of interest and is not liable for any losses incurred from reliance on the report.

Disclaimer

The report is subject to legal restrictions in the UK, US, and Singapore.
In the US, it is only for major institutional investors.
In the UK, it is only for certain qualified investors.
In Singapore, it is only for Accredited Investors, Expert Investors, or Institutional Investors.