China’s onshore market may avert a second bond default by a state-owned company after Guangxi Nonferrous Metals Group Co. flagged the notes’ repayment.
The company posted a notice on Chinamoney, the website of the China Foreign Exchange Trade System, Thursday saying June 13, when the securities mature, is the payment date, or the next working day if that’s a holiday. That’s a signal the company, wholly owned by local government, plans to redeem all of the 1.3 billion yuan ($209.4 million) of principal, as well as interest owed, according to Guosen Securities Co.
The payment would be a reprieve for Chinese debt markets after Baoding Tianwei Group Co. became the first state-owned enterprise to default in April and the third company to renege on onshore notes in the past two months. While Premier Li Keqiang is allowing market forces to play a greater role in the economy, he wants a shift to consumer-focused growth from traditional smokestack industries without causing a sharp slowdown.
“Regional state-owned entities have closer relationships with local governments and may get quicker support from” them, Guosen analysts led by Dong Dezhi said in a report Friday.
Chinese companies have canceled or delayed planned bond sales of at least 10.5 billion yuan this month after the string of defaults pushed up borrowing costs.
Wenzhou Modern Services Investment Group Co. canceled a sale of 1 billion yuan of short-term bills because it was undersubscribed due to “market volatility,” according to a company statement Friday to the Shanghai Clearing House. Beijing Energy Investment Holding Co. also canceled a 1 billion yuan sale originally planned for June 11.
Guangxi Nonferrous said earlier this week it may fail to repay the principal and 62.92 million yuan of interest on the 4.84 percent bond. The company, based in Nanning in Guangxi province, said it was trying to raise money through various channels. It reported a loss of 1.63 billion yuan in 2014, citing overcapacity and falling product prices, according to a June 8 statement.
The company had 28.3 billion yuan of borrowings and 30.2 billion yuan of assets as of March 31, according to an April 30 statement. It also has 500 million yuan of private bonds due Nov. 5 and 500 million yuan of private notes due February 2016, according to data compiled by Bloomberg.
— With assistance by Judy Chen