Chinese oil firm MIE defaults on US$248 million bond after value of its assets fall sharply

Company controlled by tycoon Zhang Ruilin fails to make US$17 million interest payment, with knock-on effects on other loans and bonds

Value of company’s assets fell by 65 per cent last year, before the sharp drop in oil prices this spring

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MIE chairman Zhang Ruilin blamed the bond default on a lack of liquidity caused by the collapse of oil prices. Photo: Weibo

Published: 6:45pm, 17 May 2020Updated: 10:45pm, 17 May 2020

The crash in international crude prices has not only burnt small Chinese investors who bought wealth management products from one of China’s largest banks but also a listed oil and gas firm that announced last week that it would default on a US$248 million bond.

MIE Holdings, controlled by tycoon Zhang Ruilin, failed to make a US$17 million interest payment on its bonds which was initially due on April 12, it said in a statement to the Hong Kong stock exchange. It was still unable to make the payment when the 30-day grace period expired on May 11, resulting in the default.

The bond default triggered cross-defaults on other financial contracts and potentially breaches the terms of additional loans and bonds totalling more than US$287.3 million, MIE said.

Zhang, who is MIE’s chairman, blamed the bond default on a lack of liquidity caused by the collapse of oil prices in the past two months, according to the exchange filing.

For example, Daqing crude oil prices fell from a high of US$69.06 a barrel in January to a low of US$12.33 in late April, a drop of more than 80 per cent.

“The company is experiencing increasing liquidity pressure due to the significant decline in revenue and cash flow caused by recent plunge in crude oil prices,” Zhang said.