Trading Suspended for China’s Baoding Tianwei as Losses Mount

Baoding Tianwei Baobian Electric Co.’s bonds and stock were suspended from trading today after the Chinese electrical equipment maker said it reported losses for a second year running.

The company, which also makes solar panels and is based in the northeast province of Hebei, reported a net loss of 5.23 billion yuan ($852 million) in 2013 versus a 1.55 billion yuan earnings deficit a year ago, according to a statement to the Shanghai stock exchange yesterday. The exchange, in line with its rules, will decide in seven trading days whether to continue the trading halt on Tianwei Baobian Electric’s bonds until its losses are reversed.

Investor scrutiny of China’s onshore bond market is mounting after Shanghai Chaori Solar Energy Science & Technology Co. last week became the first company to default. Chaori Solar’s failure to pay has stoked speculation more companies may miss debt deadlines also.

The yield on Tianwei Baobian Electric’s 1.6 billion yuan of 5.75 percent bonds due 2018 has soared 537 basis points over the past year to 11.13 percent as of yesterday, according to exchange data. Its stock has fallen 37 percent.

Baoding Tianwei Group, a central-government owned company and Tianwei Baobian Electric’s controlling shareholder, provided a full, unconditional and irreversible guarantee for the notes, according to the notes’ 2011 prospectus.

Bonds with a guarantee have smaller risks than non-guaranteed securities because a guarantor is required to provide capital to repay the debt if the issuer isn’t able to meet its obligations, according to Guotai Junan Securities Co., the nation’s third-biggest brokerage.

China Lianhe Credit Rating Co. lowered Tianwei Baobian Electric’s rating to AA from AA+ last April, according to a company statement to the exchange.

— With assistance by Judy Chen

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