China Coal Miner Defaults on Convertible Debt as Prices Sink

  • Up Energy Development failed to pay notes by Feb. 18 deadline
  • Cross default triggered on HK$3.46 billion of other debt

Up Energy Development Group Ltd., a Hong Kong-listed producer of coking coal with mines in China, has defaulted on convertible bonds, becoming the latest firm in the industry to renege on obligations after prices of the fuel plunged.

QuickTake Confronting Coal

The company failed to repay an unspecified amount of convertible notes by a Feb. 18 grace-period deadline after missing payment by the Jan. 18 maturity, according to a filing Friday. That gives holders of other debt totaling HK$3.46 billion ($444.8 million), including convertible securities due 2018, the right to demand immediate repayment under a cross-default clause, it said.

Prices for hard coking coal, used in steelmaking, have fallen 43 percent since the beginning of 2014. Winsway Enterprises Holdings Ltd., a Chinese coking-coal importer, missed interest payment for the second time in October on a debenture due 2016. Coal miner Hidili Industry International Development Ltd. didn’t repay dollar-denominated bonds due in November.

Up Energy is discussing with its creditors to restructure its debt or reach a standstill agreement with the creditors not to take enforcement actions, the filing said. The board has proposed open offer to existing holders to subscribe to the company’s shares.

In September, the company completed the acquisition of Canada’s Grande Cache Coal, according to its website. Along with four coal mines in Xinjiang, it has coal resources of about 1.2 billion tons and reserves of 300 million tons, the website said. Its shares have dived 32.6 percent this year to HK$0.3.

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