Chinese Dye Maker Defaults After Chairman Assisted Probeby
Yabang failed to make full 215.9 million yuan bond payment
At least seven companies defaulted on onshore notes in 2015
A Chinese dye-and-paint maker defaulted on a bond after its chairman’s involvement in a government probe crimped financing, flagging risks to investors posed by President Xi Jinping’s corruption crackdown.
Yabang Investment Holding Group Co. failed to make full payment of principal and interest totaling 215.9 million yuan ($33.2 million) on 7.95 percent commercial paper due Feb. 9, according to a company statement to the Shanghai Clearing House. The firm’s Chairman Xu Xiaochu had been required to assist in an unspecified probe and some banks had tightened lending to the company after that, it said.
At least seven Chinese companies defaulted on domestic notes last year amid the country’s weakest economic growth in a quarter century. The anti-corruption investigations are adding to risks. Kaisa Group Holdings Ltd. last year became the first Chinese developer to default on dollar notes, amid a probe. Future Land Development Holdings Ltd. said last month that its Chairman Wang Zhenhua was being investigated by Changzhou city authorities. Its 10.25 percent 2019 dollar notes plunged by a record the next trading day.
“There is higher risk facing private-sector Chinese companies this year due to continued anti-corruption probes and the fact that banks are turning more cautious towards lending to them,” said Ji Weijie, credit analyst at China Securities Co. in Beijing. “With lots of companies facing a cash crunch now, banks cutting financing would quickly lead to corporate failures.”
Yabang, based in the eastern province of Jiangsu, is seeking funds for repayment of the notes which it had issued last year with 200 million yuan principal, according to the statement. Xu has resumed normal work at the firm, it said.