Farming giant Chaoda Modern Agriculture has increased its planned bond sale 25 per cent to US$250 million. And in another signal investors' appetite for lending to high-risk Chinese companies has hit exuberant highs, the price of bonds issued by China Forestry, the embattled logging company whose former chief executive is detained for alleged embezzlement, is rising.
Chaoda, which has often raised corporate governance concerns and whose chairman Kwok Ho has cut his stake in the company via stock sales to 19 per cent, increased its planned bond issue from US$200 million to meet high demand, three people familiar with the sale process said.
China Forestry's bonds rose 1 per cent to 78.01 cents on the dollar last night. The move was small, but it came just two days after the company said it had been the victim of fraud by former chief executive Li Hanchun and one day after credit ratings agency Moody's Investors Service downgraded the bonds three notches to Caa2, a level far below the threshold for what is considered a junk bond.
The logger's bonds traded as low as 50 cents on the dollar in late January, when the High Court in Hong Kong froze Li Hanchun's assets. They have risen 15 per cent in the last four weeks.
Chaoda, which claims to be the mainland's largest vegetable grower, is set to pay up for its bonds. People involved in the transaction said the company would offer around 8.5 per cent interest. A Chaoda spokesman declined to comment.
China Forestry's Li was detained by the public security bureau in Guizhou in February for allegedly stealing 30 million yuan (HK$35.85 million) of company funds. The logger, whose investors include US private equity firm Carlyle, said on Monday that Li had falsified bank statements, management accounts and harvesting records, while other books and records were missing.