Chinese Dye Maker Unsure It Can Pay Bond as Chief Assists Probe

  • Yabang Investment's 200 million yuan notes come due on Feb. 9
  • Company says cash crunch due to chairman assisting probe

A Chinese dye-and-paint maker said it’s unsure it can repay bonds due next week because its chairman’s involvement in a government probe has crimped financing.

Yabang Investment Holding Group Co. said that Chairman Xu Xiaochu’s assistance in an investigation hurt its access to financing and caused its lenders to ask for early repayment of debts, according to a statement dated Thursday on a website of the National Interbank Funding Center. The company -- based in the eastern province of Jiangsu -- is seeking ways to repay the 200 million yuan ($30.4 million) of 7.95 percent commercial paper due Feb. 9., according to the statement.

Yabang is the latest reminder of the risks President Xi Jinping’s three-year-old corruption crackdown continues to pose for Chinese companies. Future Land Development Holdings Ltd., also based in Jiangsu, said in a Jan. 22 statement that its chairman and controlling shareholder Wang Zhenhua was being probed by Changzhou city authorities. Its 10.25 percent 2019 dollar notes plunged by a record 10 cents on the dollar on the next trading day.

“In China, if there is a corporate governance problem with a private-sector company, it tends to associate with the controlling shareholders,” said Ben Sy, the head of fixed income, currencies and commodities at the private banking arm of JPMorgan Chase & Co. in Hong Kong in an interview last week. “You got to be careful dealing with the privately owned companies given the political risk.”

Two calls to Yabang’s general line went unanswered. Next week is a public holiday in China, meaning the actual due date for the company’s bonds would be the next business day, according to the statement.

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