Guangxi Nonferrous Metals Group Co. may have difficulty repaying its bonds on its own, China Credit Rating Co. said, highlighting the risk of it becoming the second state-owned firm to default.
The company, based in Nanning in China’s southern Guangxi province, must repay 1.3 billion yuan ($210 million) of principal and 62.92 million yuan of interest on its 4.84 percent notes due June 13. China Credit Rating cut Guangxi Nonferrous Metals’ score to BBB- from BBB+ and lowered its outlook to negative from stable yesterday, citing “huge” short-term debt pressure and production curbs.
Asia’s biggest economy, whose growth slowed to its weakest pace since 1990 last year, has shown little evidence of acceleration even after Premier Li Keqiang cut interest rates three times since November. A bottle maker that supplies Coca-Cola Co. became the fourth company to miss obligations in the onshore bond market last week and a maker of smoked duck leg cited increasing difficulty getting credit as it defaulted on bank loans ahead of a bond deadline June 12.
“Lower-rated issuers are facing big pressure to repay debt,” said Sun Binbin, a bond analyst at China Merchants Securities Co. in Shanghai. “But given the loose monetary environment, there won’t be a surge in bond defaults in China.”
Two phone calls to Guangxi Nonferrous Metals seeking comment weren’t answered today.
Baoding Tianwei Group Co. became the nation’s first state-owned enterprise to default on domestic debt in April.
The yield premium for three-year AA- rated corporate bonds over sovereign notes has dropped 36 basis points this year to 234, according to ChinaBond.
Dagong Global Credit Rating Co. today cut Guangxi Nonferrous Metals’ issuer and 2015 bond rating to AA- from AA, saying it hasn’t received any filing from the company regarding the notes’ repayment plan.
The yield on Guangxi Nonferrous Metals’ bonds has risen three basis points this week to 3.49 percent as of yesterday, ChinaBond data show.
The company is trying to raise funds for its note repayment with the help of the provincial government, China Credit Rating said in a report today. Guangxi Nonferrous Metals is owned by the State-owned Assets Supervision & Administration Commission of Guangxi province.
— With assistance by Judy Chen