China Fertilizer Maker's Bonds Slump to Record Ahead of Deadline

  • Inner Mongolia Nailun's 2018 bond has dropped to 44 yuan
  • Defaults by China company note issuers have risen to 7 in 2016

A Chinese fertilizer maker’s bonds have dropped to a record low ahead of a repayment deadline Thursday, in the latest sign of financial strains among the nation’s firms as the government allows more defaults.

Inner Mongolia Nailun Group Inc.’s 800 million yuan ($123.6 million) notes due in 2018 declined 13 percent to 44 yuan on Friday, the lowest since issuance in 2011, according to valuations compiled by Chinabond. Investors have an option to choose to sell the 7.48 percent securities back to the company on May 5. The firm said on April 19 it was uncertain it can pay 737 million yuan that investors had said they opted to sell back at that point, according to a statement posted on Chinabond’s website.

Chinese companies are struggling with a record amount of debt repayments this quarter amid the worst economic slowdown in a quarter century. There have been at least seven defaults by Chinese corporate bond issuers this year and the impact that’s had on investor confidence has helped fuel an increase in corporate borrowing costs.

Pengyuan Credit Rating Co. said there is “big uncertainty” if Inner Mongolia Nailun can repay the bonds investors will sell back to the issuer on May 5, according to a statement on Chinamoney’s website on April 29.

The fertilizer manufacturer has had overdue loans because of a capital shortage, it said in its April 19 statement. Pengyuan downgraded the issuer rating for the company to B from BBB on April 28.

— With assistance by Judy Chen

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