China Shipmaker Bonds Rally as Investors Shrug Off Debt Warnings

Sainty Marine Co. bondholders have shrugged off the Chinese shipbuilder’s warning on rising overdue debts.

Onshore notes of the Nanjing-based firm erased losses from Monday, when they last traded, even after it said overdue loans had risen to 616.9 million yuan ($99.3 million). The 2019 bond is fully guaranteed by state-owned Jiangsu Guoxin Investment Group Ltd., according to the prospectus. Its yield fell 12 basis points to 6.82 percent as of 12:33 p.m. in Shanghai.

“The guarantee by a state-owned company has ensured investors it will repay the debt by the due date,” said Sun Binbin, a bond analyst at China Merchants Securities Co. in Shanghai.

Orders for China’s shipbuilders may decline as much as 60 percent this year as they struggle with overcapacity amid an economic slowdown, predicts China Bond Rating Co. It’s one of the industries that will have the highest default risk in the second half, according to Moody’s Investors Service.

Sainty must repay 51.48 million yuan of interest on Sept. 18, according to a China Bond Rating report on Aug. 3. The company’s debt to asset ratio rose to 98.3 percent by the end of March, said the Beijing-based rating firm.

Pengyuan Credit Rating Co. cut the company’s issuer rating to BB from BBB on July 23, citing “big” liquidity risks and possible losses if it fails to deliver orders.

— With assistance by Judy Chen

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