- Company has reported losses since second half of 2012
- Bonds dropped to 17.5 cents on Tuesday, lowest on record
Mongolian Mining Corp., a coking coal producer, hired advisers for a potential restructuring of $600 million of notes due in 2017 as the company struggles with declining coal prices amid oversupply and weakening demand from China’s steel industry.
The company hired JPMorgan Chase & Co. and SC Lowy Financial HK Ltd., and encouraged noteholders to form a committee to help discussions, it said in a filing to the Hong Kong Stock Exchange. The bonds dropped to 17.5 cents on the dollar Tuesday, their lowest on record.
Steel output and demand in China, the biggest producer, is contracting as the world’s second-largest economy grows at the slowest pace in a generation. The country plans to cut crude steel production capacity by 100 million tons to 150 million tons, the State Council said Sunday, without specifying a time frame. Coking coal futures have slumped 23 percent in Dalian in the past year, while the company has posted six straight semi-annual losses.
“Changes to economic policy implemented within the group’s principal target market, China, resulted in reduced crude steel production and consequently lower coking coal consumption and declining import volumes,” the company said in its statement.
Mongolian Mining is due to pay a $26.6 million coupon on March 29. If it fails to do so, it will be the fourth Asian coal company to default on its offshore debt obligations in the past year, according to data compiled by Bloomberg.
Winsway Enterprises Holdings Ltd., Hidili Industry International Development Ltd. and PT Berau Coal Energy have all missed payments on their dollar notes in the past 12 months.