China’s junk bonds were rattled after a bottle maker became the fourth company to default on local notes as the slowing economy weighs on issuers’ debt obligations.
The yield premium for three-year AA- rated corporate bonds over sovereign notes widened seven basis points this week to 239, the highest since May 15, according to Chinabond data. Zhuhai Zhongfu Enterprise Co. repaid only 35 percent of the 590 million yuan ($95.1 million) principal for securities that fell due Thursday, the company said Friday.
Chinese companies are grappling with a slowdown in the economy while facing a record amount of bond repayments this year. In April, Cloud Live Technology Group Co., a private-sector company, failed to meet bond obligations and Baoding Tianwei Group Co. became the nation’s first state-owned enterprise to default on domestic debt.
“More defaults may come this year before the economy really stabilizes,” said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shanghai. “Zhuhai Zhongfu is a private company so the default’s impact on market is limited.”
Sinovel Wind Group Co.’s notes due in 2016 climbed 216 basis points this week to 17.6 percent, the highest since April 29 last year. The rate on Ingenious Ene-Carbon New Materials Co. bonds due in November surged 621 basis points to 18.96 percent, the highest since their 2009 sale.
— With assistance by Judy Chen