China’s Wuzhou International misses US$204 million in bond payments
The company is among a rising number of Chinese firms to default on payments this year as a result of tightened government controls
Troubled mainland Chinese developer Wuzhou International Holdings said it had missed 1.4 billion yuan (US$204 million) in bonds payments and was also facing claims for at least 756 million yuan, adding to a string of earlier defaults and financial woes.
The company’s revelation comes amid the rising the number of bond defaults by Chinese companies this year as the government reduced implicit guarantees, in turn moral hazard, to steer the debt market towards a healthier development. State-owned mainland media reported that 21 Chinese companies defaulted in 48.6 billion yuan of bond payments in the third quarter, with listed companies accounting for half of the volume.
Property developers like Wuzhou International have been especially hard hit under Beijing’s deleveraging drive to reduce risks and its imposed curbs on lending to cool the overheated property market.
“The number of bond defaults of weaker, private companies will continue to increase in a steady, controlled manner,” said Judy Kwok-Cheung, a fixed income analyst at Bank of Singapore. But Kwok-Cheung said despite the increased number, the default rate of 0.2 per cent remained low.
In a filing to the Hong Kong stock exchange on Thursday, Wuzhou International said it failed to repay 395.5 million yuan in principal and the 111 million yuan in interest for a portion of the second tranche of the 1.5 billion yuan 2016 corporate bonds on September 19.
In addition, it was unable to pay all of the 1 billion yuan in principal and 50.6 million yuan of interest on September 20 for the first tranche of 2017 bonds sold by its indirectly wholly-owned subsidiary Wuxi Wuzhou Ornament City.