Tianwei Bonds to Be Halted From Trade Amid Rising Default Risk

Baoding Tianwei Baobian Electric Co. said its notes will be halted from trading tomorrow amid signals the Chinese government will allow more defaults in the nation’s onshore bond market as the economy slows.

The solar-cell maker said the Shanghai Stock Exchange decided to halt trading of its 1.6 billion yuan ($258 million) of bonds, according to an exchange statement today. The company reported a net loss of 5.23 billion yuan in 2013 versus a 1.55 billion yuan earnings deficit a year ago and its capacity to repay its debt is in “absolute trouble,” Guotai Junan Securities Co. said in a March 13 report.

The collapse of developer Zhejiang Xingrun Real Estate Co., which government officials said this week doesn’t have enough cash to repay 3.5 billion yuan of debt, is adding to concerns nonpayments may spread. Premier Li Keqiang said earlier this month defaults may be unavoidable in some cases after Shanghai Chaori Solar Energy Science & Technology Co. failed to make a full coupon payment on March 7, the first default in China’s onshore market.

The yield on Tianwei Baobian’s 5.75 percent notes due 2018 had surged 537 basis points over the past year to 11.13 percent on March 10, exchange data show. Trade was temporarily suspended by the exchange from March 11 after the company reported a second straight year of losses.

‘Great Need’

China International Capital Corp., in a report released on March 14, flagged 12 companies with outstanding onshore bonds in “great need” of more scrutiny after changes in the credit profiles of the issuers, including Sinovel Wind Group Co. and Tianwei Baobian.

Tianwei Baobian said on March 13 it will pay interest due July 11 on the notes, according to a Shanghai stock exchange statement. The company, based in the northeast province of Hebei, had 3.88 billion yuan of short-term borrowings as of the end of 2013, including 3.3 billion yuan of bank loans, while its cash and cash equivalents were 1.59 billion yuan, the Guotai Junan report said.

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

An official in the investor relations department of Tianwei Baobian who asked not to be identified wouldn’t comment on the possibility of a default on the company’s borrowings today.

Tianwei Baobian’s stock slumped 19.7 percent in Shanghai last week, the biggest weekly drop in almost seven years.

— With assistance by Judy Chen

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