Sinosteel Parent Urges Bondholders Not to Redeem, Newspaper Saysby
Parent sent letter to bondholders, 21st Century Business says
Sinosteel Corp. trying to restructure the debt, report says
Sinosteel Corp. asked investors who hold bonds issued by unit Sinosteel Co. to withdraw registrations to redeem the debt because the company may not be able to pay, the 21st Century Business Herald said, citing a letter from Sinosteel Corp. to the bondholders.
The parent group is trying to restructure the debt, and is working with the government’s National Development and Reform Commission and the State-owned Assets Supervision and Administration Commission on a plan, the newspaper said, citing the letter. Two calls to Sinosteel Corp.’s media office by Bloomberg News went unanswered on Friday.
Sinosteel Co., a state-owned steel trader, may have to honor 2 billion yuan ($315 million) of principal next Tuesday, when holders of the 2017 debt can exercise an option forcing the notes’ redemption two years before they mature, according to data compiled by Bloomberg. In the letter, Sinosteel Corp. asked the investors to withdraw their registrations to exercise the option, according to the report.
The steel industry in China, the world’s largest, is battling tumbling product prices, slowing local demand and overcapacity, and a default by Sinosteel Co. would be the first by a Chinese steel company in the local bond market, according to China International Capital Corp. Premier Li Keqiang is allowing more defaults to try to weed out the weakest firms as he seeks to rebalance a slowing economy.
Should holders of the 2017 notes exercise the option to sell them back to Sinosteel Co., the firm will struggle to repay, according to China Merchants Bank Co. If there’s no external help, Sinosteel Co. isn’t in a position to repay the bonds, Sun Binbin, a bond analyst at China Merchants, told Bloomberg.