Better Debt Metrics Overshadowed by Regulatory Uncertainty? Reasons for GLP Bond Price Decline

Bloomberg reported last week that Chinese regulators issued informal guidance instructing insurance companies to refrain from increasing their investment in the logistics giant GLP. This news sparked investor anxiety regarding the stability of GLP’s operations in China, causing bond prices to plummet by as much as 23% (see Table 1).

Bonds	Issue Size (USD million)	17 March 2026 Investor Bid Price	26 March 2026 Investor Bid Price	Change in %
GLPSP 9.750% 20May2028 Corp (USD)	1,000	96.4	83.1	-14%
GLPSP 4.500% Perpetual Corp (USD)	850	64.2	51.2	-20%
GLPSP 4.600% Perpetual Corp (USD)	300	61.4	47.5	-23%
Sources : Bondsupermart Data as of 26 March 2026

GLP's CFO, Nicholas Johnson, promptly stated during an investor meeting on March 18 that the company had not received such guidance and that liquidity remained unaffected. However, GLP is currently in a blackout period ahead of its May earnings release, preventing the disclosure of fresh financial data to reassure investors. Consequently, bond prices remained at depressed levels following the meeting.

GLP's Debt Levels Continue to Improve

As of the 1H of 2025, GLP recorded total revenue of approximately US$1 billion, a 3% YoY decrease. Within this, the highly watched data centre business saw revenue jump 39% YoY to US$120 million, while rental income rose 14% to US$370 million (see Chart 1). However, the US$3.7 billion sale of its fund management business, GCP International, in March 2025 led to a 40% drop in management fees to US$270 million, offsetting the growth in other sectors.

Chart 1: GLP’s Revenue

GLP’s interest payment capacity has historically been weak, with an interest coverage ratio of just 1.3x. Its core EBITDA is barely sufficient to cover cash interest expenses, making the company highly dependent on the sale of investment properties to maintain liquidity. Selling assets to its own managed funds remains an effective recycling strategy; given that these funds hold nearly US$7 billion in dry powder (unallocated capital), they possess the capacity to acquire GLP's assets.

Furthermore, following the sale of GCP International, GLP used a portion of the cash to repay debt. Total debt fell 13.4% YoY to US$8.78 billion, and interest expenses are expected to decrease in the second half of the year. Therefore, GLP’s ability to service interest remains within an acceptable range.

GLP’s net gearing ratio improved to 47% in 1H2025 (compared to 53% in 1H2024). In February this year, the company also issued additional USD bonds maturing in 2028 to refinance upcoming debt. While efforts have been made to extend the debt maturity profile, the overall distribution remains relatively short, with most debt concentrated within the next three years. Meanwhile, GLP holds nearly US$13 billion in investment properties; although these assets have lower liquidity, they serve as potential debt-repayment tools. Furthermore, the US$1.5 billion capital injection from the Abu Dhabi Investment Authority (ADIA) in August 2025 has provided a buffer against short-term repayment pressures.

GLP Bond Price Decline: The Impact of China Concentration Risk

China operations accounted for 70% of GLP’s total revenue in 1H2025, a concentration that increased after the divestment of its non-China fund management business. In mid-2025, GLP secured a 2.5 billion RMB investment from the state-backed Quzhou Industrial Group for its domestic data centers.

As the company’s most promising growth engine, the data center segment currently has only 0.4 GW of operational capacity in China, while another 1 GW of contracted capacity is still under construction. Data from China Talk indicates that the capital expenditure for building 1GW of data center capacity in China is between US$5 billion and US$7 billion. Thus, GLP requires significant follow-on investment from mainland investors. Furthermore, GLP is preparing for an Initial Public Offering (IPO) in Hong Kong this year, a move aimed at injecting new capital into its China operations.

If the regulatory rumors prove true, they will undoubtedly hinder its China operations—particularly the upcoming IPO and the capital-intensive data center projects—potentially dragging down revenue growth.

Moreover, with 58% of its total debt denominated in RMB, these rumors could impair the company’s ability to refinance within mainland China, increasing the difficulty of debt repayment. Consequently, the combination of regulatory uncertainty and heightened China concentration risk are the primary factors weighing on GLP’s bond prices.

Bond prices have already undergone a certain degree of adjustment. Holders may consider a wait-and-see approach until further updates clarify the situation, particularly following the company's expected release of financial reports in May, which will provide clearer fundamental guidance.

Perpetual bond investors should pay close attention to the 'optional deferral of interest' clauses; these allow the issuer to suspend interest payments without triggering a default. Furthermore, the subordinated nature of these bonds means they rank lower in the repayment hierarchy than senior debt, presenting a potential risk that should not be underestimated.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report holds a NIL position in the abovementioned securities.

RISK DISCLOSURE STATEMENTS FOR BONDS

Key risks of investing in bond

Credit risk - bonds are subject to the risk of the issuer defaulting on its obligations. It should also be noted that credit ratings assigned by credit rating agencies do not guarantee the creditworthiness of the issuer; and
Liquidity risk - some bonds may not have active secondary markets and it would be difficult or impossible for investors to sell the bond before its maturity; and
Interest rate risk - bonds are more susceptible to fluctuations in interest rates and generally prices of bonds will fall when interest rates rise; and
Exchange rate risk - If the bond is denominated in a foreign currency, you face an exchange rate risk. Any fall in the foreign currency will reduce the amount you receive when you convert a payment of interest or principal back into your local currency; and
Event risk - A corporate event such as a merger or takeover may lower the credit rating of the bond issuer. In case the corporate restructurings are financed by the issuance of a large amount of new debt-burden, the company's ability to pay off existing bonds will be weakened.

Key risks of investing in high-yield bonds

Higher credit risk - since they are typically rated below investment grade or are unrated and as such are often subject to a higher risk of issuer default; and
Vulnerability to economic cycles - during economic downturns such bonds typically fall more in value than investment grade bonds as (i) investors become more risk averse and (ii) default risk rises.

Bonds with special features

Some bonds may contain special features and risks that warrant special attention. These include bonds:

That are perpetual in nature and interest pay-out depends on the viability of the issuer in the very long term;
That have subordinated ranking and in case of liquidation of the issuer, investors can only get back the principal after other senior creditors are paid;
That are callable and investors face reinvestment risk when the issuer exercises its right to redeem the bond before it matures;
That have variable and/or deferral of interest payment terms and investors would face uncertainty over the amount and time of the interest payments to be received;
That have extendable maturity dates and investors would not have a definite schedule of principal repayment;
That are convertible or exchangeable in nature and investors are subject to both equity and bond investment risk; and/or
That have contingent write down or loss absorption feature and the bond may be written-off fully or partially or converted to common stock on the occurrence of a trigger event.

Remarks

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