Chinese Fertilizer Producer Sees Uncertainty in Bond Repayment

  • Jiangsu Lvling Runfa didn't deposit note funds before deadline
  • At least 6 firms have defaulted on local yuan notes this year

A Chinese fertilizer maker is unsure it can make a bond payment as it faces a cash crunch amid a halt in production, highlighting mounting risks in the local note market after at least six firms defaulted this year.

Jiangsu Lvling Runfa Chemical Co. flagged the concern about the so-called collective notes, which typically are issued by several small- and medium-sized companies that don’t have the ability to sell securities on their own, in a Nov. 23 filing on China Money’s website. The manufacturer, based in the eastern city of Suqian, must repay 53.1 million yuan ($8.3 million) in principal and interest on Dec. 4 on the 6.2 percent notes that have a total face value of 100 million yuan, according to the statement. The filing didn’t specify the other issuers.

Defaults are spreading in China as the weakest economic growth in a quarter century drags on profits. China Shanshui Cement Group Ltd. became the latest defaulter on domestic notes when it missed payments earlier this month. About 43 companies have canceled or delayed 46.7 billion yuan of bonds since the cement maker issued a default warning on Nov. 5.

Jiangsu Lvling Runfa failed to deposit the 53.1 million yuan in its payment account before Nov. 20 as required by the bond prospectus. Jiangsu Re-Guarantee is the guarantor for the notes and will be responsible for payment in case of a default, according to the filing.

A call to the general line for Jiangsu Lvling Runfa listed on the company website went to a recording saying the number is no longer in service.

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