Yen bonds of a distressed Japanese hotelier are pricing in increased default risk after concerns about its finances mounted since the issuer was cut further into junk territory in late December.
(Bloomberg) — Yen bonds of a distressed Japanese hotelier are pricing in increased default risk after concerns about its finances mounted since the issuer was cut further into junk territory in late December.
Unizo Holdings Co.’s 10 billion yen ($76 million) note due in May touched record lows of 34.43 yen this month, according to the latest data available on Bloomberg. That’s after Japan Credit Rating Agency Ltd. cut the troubled real-estate firm’s rating by two levels to B- on Dec. 28, saying that it would be difficult for the company to secure financial resources for the repayment solely from the cash flow of its main business.
“The market is aware of the bond’s default risk,” and the most recent downgrade has put that under the spotlight, said Toshiyasu Ohashi, chief credit analyst at Daiwa Securities Co.
A spokesperson at Unizo wasn’t immediately able to respond to questions from Bloomberg News regarding the possibility of a default.
The hotel chain’s notes maturing in November 2023 and May 2024 also reached all-time lows after the sixth reduction by JCR since September 2020, the data show. The Japanese rating agency also slashed the rating of Unizo’s bonds to CCC from B+.
Unizo has been selling assets, including a Tokyo office building, according to a bi-annual financial report in December and its annual statement in June.
The Tokyo-based company’s bonds have been trading at distressed levels since the pandemic hurt its hotel business after Japan tightened border controls to overseas visitors. Unizo became embroiled in a hedge fund fight in 2020 and was subject to a Lone Star-financed management buyout.
Any default would be the first in Japan since Takata Corp., a maker of faulty air bags, failed in 2017, according to a report earlier this month by Daiwa Securities.
Unizo has 61 billion yen of bonds outstanding, data compiled by Bloomberg show. It last sold debt in November 2017, according to the data.
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