A Chinese local government financing vehicle has for the first time opted to pay a higher interest rate on its local bond instead of fully repaying it, a surprise move that’s seen adding to investor concern over credit risks in the sector.
Jilin Transportation Investment Group Co., a financing entity for railway construction in China’s northeast Jilin province, said on Monday it plans to skip the call option on a 4.64% 1.5 billion yuan ($210.8 million) perpetual note. Instead, it will pay an increased coupon of around 8% on the note, according to Bloomberg calculations based on the initial offering terms. Calls to the company’s capital management department went unanswered.