China's Yunnan Coal Becomes Latest Miner to Struggle With Debts

  • Company and its units owe 1.3 billion yuan of overdue loans
  • Yunnan government is monitoring the miner's cash problems

Yet another Chinese coal miner is struggling with debt payments as the slumping economy curbs demand and spurs defaults.

State-owned Yunnan Coal Chemical Industry Group Co. and its businesses had 1.31 billion yuan ($205.6 million) of overdue loans as of Oct. 30 due to rising borrowings and a cash shortage, its unit Yunnan Yunwei Co. said in a Shanghai Stock Exchange statement dated Tuesday. China Chengxin International Credit Rating Co. lowered the parent’s issuer rating to BB from AA on Nov. 13, and put the firm on notice for a possible further cut.

China’s slowest growth since 1990 twinned with a global commodities slump is crimping cash flows in the nation’s coal industry, with two firms defaulting on offshore bonds in 2015. Coal trader Winsway Enterprises Holdings Ltd. failed to pay interest on dollar notes for a second time this year in October, and Hidili Industry International Development Ltd. didn’t repay securities due Nov. 4.

“Default risks in the coal industry are very high,” said Sun Binbin, a bond analyst at China Merchants Securities Co. in Shanghai. “The economy is slowing and there is not enough demand for coal or coal-related products.”

Monitoring, Probe

The Yunnan provincial government is monitoring Yunnan Coal Chemical’s difficulties, the company said in a Nov. 11 statement. The local authorities will aim to prevent the firm from defaulting on bonds or going bankrupt, according to the statement. Dong Guanghui, the company’s vice chairman, was under a probe on suspicion of serious rule violations, Yunnan Yunwei said in June.

Yunnan Coal Chemical has a total of 6.3 billion yuan of outstanding bonds, according to data compiled by Bloomberg. The next securities coming due will mature in April 2016 after being privately issued in April this year with a coupon rate of 8.5 percent.

Two calls to Yunnan Coal Chemical went unanswered on Tuesday.

Guotai Junan Securities Co. said last week it’s unknown how much the Yunnan government can help the miner after the southern province’s economy slowed rapidly and the debt repayment capacity of many state-owned companies in the region worsened.

Yunnan Yunwei has 1 billion yuan of outstanding bonds due 2018, guaranteed by Yunnan Coal Chemical, and investors have an option to enforce their redemption in June next year.

— With assistance by Judy Chen

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