China Shipbuilder Flags Bond Repayment Risks as Economy Slumps

  • Wuhan Guoyu sees uncertainty in repaying bonds due this week
  • The industry’s sluggishness weakens its financial strength

A Chinese shipbuilder said it may not be able to repay bonds due this week, highlighting rising default risks in the nation as the economy slumps.

Wuhan Guoyu Logistics Industry Group Co. said there is uncertainty if it can repay the 400 million yuan ($60.2 million) of notes due Aug. 6 because of a capital shortage, according to a statement on Chinamoney’s website Monday. The company issued the one-year notes at a yield of 7 percent in 2015.

Chinese companies are struggling with record debt payment in the second half as Premier Li Keqiang seeks to cut overcapacity even after the economy grew at the slowest pace in a quarter century. At least 17 bonds have defaulted this year, already exceeding the seven for all of 2015.

Sluggishness in the shipbuilding industry has weakened Wuhan Guoyu’s financial strength, the company said in the statement. The shipbuilder said on June 13 it had used debt proceeds originally planned for a bank loan payment to repay 200 million yuan of one-year notes due in November 2015.

The company also said it’s still trying to raise funds through many channels.