Valtech’s valuation team has recently completed an expected credit losses (ECL) assessment on several listed debts issued by large-cap PRC property developers for a HK-listed company. Although the bonds are listed, the recent liquidity crisis facing the PRC property developers caused by the downturn of PRC property market has impacted the trading volume of those bonds. The volatility of the bond price has skyrocketed due to the huge uncertainties of the ability to repay of the bond issuers. In addition, the thin trade volume of those bonds further posing challenges in their ECL assessment.
On top of the above market activities, the debt restructuring programs proposed by the bond issuers in relation to their issues have complicated the determination of credit conditions of those bonds. Comprehensive studies are required in order to provide an objective conclusion of whether those listed bonds are in default. In-depth market analysis is necessary to determine the appropriate recovery rate in the event of default. Our seasoned valuation team has developed in-house database in handling the ECL requirements for different industries to assist our clients to meet their own credit risk management objectives while complying with the financial reporting standards.
