Major Chinese electronics maker Tunghsu seeks government lifeline after shock bond default as slowing economy leaves private firms cash-strapped
- Tunghsu Optoelectronic Technology shocked the market by missing bond payments worth US$285 million even though it had recently reported huge cash holdings
- Private companies have made up about 90 per cent of Chinese corporate defaulters this year amid slowing economy, crackdown on shadow banking
Chinese electronics manufacturer Tunghsu Optoelectronic Technology is seeking a lifeline from its local government after missing two bond repayments, making it the latest victim of the country’s debt-strapped private economy.
Its owner, Tunghsu Group, was immediately downgraded by credit rating agency S&P Global.
The controlling parent of China’s largest producer of photoelectric display materials plans to hand over a majority stake of 51.5 per cent to the state-owned asset watchdog of Hejiazhuang city in northern China, it said in a stock exchange filing on Tuesday.
Tunghsu failed to repay principal and interest worth over 2 billion yuan (US$285 million) in total for two domestic bonds due on Monday. It blamed a short-term liquidity crunch in a separate filing on Monday evening.
“The company is actively seeking funding and negotiating with the creditors,” Tunghsu said in the statement. “All operation remains normal.”
The delinquency came as a shock to the market because Tunghsu had reported holdings of cash or cash equivalent worth over 18 billion yuan as of the end of September in its latest quarterly report, more than enough to meet the bond repayments.
The default reflects the highly-stretched liquidity conditions faced by China’s private firms, which account for over 60 per cent of the country’s gross domestic product and employ more than 80 per of the workforce.