China chip maker Tsinghua Unigroup to default on US$450 million bond as concerns mount over debt levels on mainland
- Failure to repay principal could trigger cross-defaults on another US$2 billion in debt
- Chip maker previously defaulted on US$199 million debt in November
Chinese chip maker Tsinghua Unigroup said that it cannot repay the principal on a US$450 million bond due on Thursday, the latest default by the company and a blow to Beijing’s efforts to build a self-sufficient semiconductor industry.
The failure to repay principal on its debt could trigger cross-defaults on as much as US$2 billion in additional debt held by the company, which is majority owned by a division of Beijing’s prestigious Tsinghua University. Tsinghua Unigroup has additional bonds set to come due next year, as well as in 2023 and in 2028.
The Tsinghua Unigroup failed to repay an onshore bond worth 1.3 billion yuan (US$199 million) in November, which led to a downgrade by China Chengxin Credit Rating Group and a suspension of trading of its debt in Hong Kong.
Tsinghua Unigroup and a subsidiary that issued the US$450 million bond “are looking into various ways to solve their current liquidity issue”, the company said.
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