MAJOR Asian logistics operator GLP’s abandoned attempt to return to the bond market after a three-year absence is a reminder of worries about the company’s financial health, despite its recent efforts to sell assets and cut debt.
The Singapore-incorporated company, which has significant business in the world’s second-largest economy, cancelled a US dollar bond sale – its first since 2021 – last week, citing insufficient demand to reach its desired pricing. It then pulled a tender offer for existing notes.
The shelved debt issuance, with a record coupon above 10 per cent, was set to be a test of investor sentiment after GLP announced a key deleveraging move a few weeks ago.
Once an investor darling, GLP has come under scrutiny in recent years due to slumping earnings and credit downgrades. The stubborn worries over its debt woes are a reflection of the fragility of companies heavily exposed to China’s faltering economy, especially the country’s crisis-hit property sector.
“Investors might be concerned about the company’s actual liquidity situation when it has a clear pipeline of asset sales,” but still chose to issue bonds at such high costs, said Iris Chen, a credit desk analyst at Nomura International HK.
GLP declined to comment.
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GLP said in its interim financial report that it had cash on hand of US$1.9 billion, and told Bloomberg News that it has sufficient resources to address business needs and debt maturities. The firm also reported total assets of US$42 billion as well as total liabilities of US$21.7 billion as of the end of June.
GLP, which had its ratings cut to junk last year, has been working to shore up liquidity amid concern about spillover from China’s property-sector crisis and economic slowdown.
In October, Ares Management agreed to acquire GLP Capital Partners’ operations outside of China for up to US$5.2 billion.
The sale should reduce pressure on GLP to quickly divest assets, Bloomberg Intelligence analysts Andrew Chan and Lisa Zhou wrote in a note on Oct 15.
Another attempt to sell a stake in GLP’s China operations to a Guangdong state-backed firm, however, stalled due to disagreements over deal terms, Bloomberg reported earlier.
More than half of GLP’s assets under management come from its China operations. In the first six months of 2024, revenue from its China business fell 9 per cent from a year earlier to US$684 million, and the company swung to an overall loss of US$397 million, according to its interim report.
Along with its bond sale, GLP also terminated a tender offer, after saying in October that it would buy back notes due June 2025 with US$1 billion in outstanding principal. The offer was to manage coming maturities, the company said in a filing.
“Given its current financial profile, GLP would likely try to tap the market again before next June to refinance its US$1 billion maturing bonds,” said Daniel Tan, a portfolio manager at Grasshopper Asset Management. “For such a large deal size, the issuer would have little pricing flexibility.”
The market remains cautious about the firm’s long-term financial health and its ability to to manage maturities, as shown by the company’s US dollar bond prices in the secondary market.
Two perpetual notes issued by GLP entities were indicated just under 60 cents on the US dollar, according to data compiled by Bloomberg. Investors generally consider bonds to be distressed if they trade below 70 cents.
Tan said the perpetual bonds’ prices suggest “a low probability of call events for both its perpetual bonds in 2026 and 2027,” referring to an issuer’s decision to redeem debt. BLOOMBERG
