Date
28 March 2017
Sichuan Shengda Group Ltd. says its pig iron business  has been hit by a cash shortage. It defaulted on a 21.75 million yuan (US$3.4 million) in interest payment due Dec 5. Photo: Internet
Sichuan Shengda Group Ltd. says its pig iron business has been hit by a cash shortage. It defaulted on a 21.75 million yuan (US$3.4 million) in interest payment due Dec 5. Photo: Internet

Sichuan Shengda becomes latest Chinese firm to default on bonds

A pig iron producer has become the seventh Chinese company to miss a bond payment this year in the domestic debt market.

Sichuan Shengda Group Ltd. said missed a 21.75 million yuan (US$3.4 million) in interest due Dec. 5 on its 7.25 percent 2018 notes because of a cash shortage, Bloomberg reports, citing a company statement on the Chinamoney website.

It also failed to repay the full 300 million yuan of principal on the bonds that holders opted to sell back early on the same day.

The company, based in the southwestern province of Sichuan, did not give details on any payment amount.

More firms in China are struggling to repay debt amid the worst economic slowdown in a quarter century.

China Shanshui Cement Group Ltd. last month became at least the sixth company in 2015 to default on yuan-denominated domestic notes.

State-owned steel trader Sinosteel Co. postponed a bond payment for a second time in November.

“Policymakers have stronger determination to weed out zombie companies and allow bond defaults,” analysts led by Jiang Chao at Haitong Securities Co. wrote in a report Monday.

Sichuan Shengda and its subsidiary had a total of 514.41 million yuan of overdue borrowings as of Nov. 25, according to a statement from Bank of Tianjin Co. on Nov. 26.

Shengda’s shareholders have provided a guarantee for the bond, said Pengyuan Credit Rating Co. in a statement on Nov. 27.

The company said it will continue to raise money to repay the debt through asset restructuring, the Monday statement said.

Sichuan Shengda said Nov. 26 it was uncertain it could repay the securities if investors redeemed them. The effective due date is Monday because Dec. 5 was a Saturday, according to its prospectus.

Pengyuan downgraded the issuer’s rating to B from BBB+ and cut the bond score to BBB from A.

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