Shanshui Cement Says Cash Insufficient to Repay Onshore Debt

  • At least 5 Chinese firms have defaulted on local bonds in 2015
  • Shanshui cites difficulty in raising financing, cash position

China faces another test in credit markets after a cement maker said it’s unsure if it can repay an onshore note due next week after a shareholder tussle stymied financing.

China Shanshui Cement Group Ltd. cited its “current cash position and the difficulties it faces in raising financing" in noting the uncertainty over repayment of the 2 billion yuan ($315.2 million) securities that were issued in April this year with a 5.3 percent coupon and mature Nov. 12. While the company has been seeking financing since June, all the financial institutions it contacted “have expressed concern in relation to the uncertainty of the management,” it said in the statement.

Defaults at China’s companies, the world’s biggest corporate borrowers, have spread this year amid the weakest economic growth in a quarter century that’s hurt industries such as cement. Coal trader Winsway Enterprises Holdings Ltd. failed to pay interest on dollar bonds for a second time this year in October while Hidili Industry International Development Ltd. didn’t repay its dollar bond due Wednesday.

"If Shanshui defaults, it will curb investors’ demand for riskier bonds,” said Zhang Li, a bond analyst at Guotai Junan Securities Co. in Beijing. "But we can’t exclude the possibility it will be able to get the money somewhere to pay."

If Shanshui were to default, it would become at least the sixth company to renege on onshore bonds this year.

— With assistance by Lianting Tu, and Judy Chen

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