A Chinese digital display panel manufacturer has skipped payment on two of its yuan securities, a warning that private firms in the nation are still experiencing a borrowing crisis in the middle of an economic slowdown.
In a stock exchange statement on Monday, Tunghsu Optoelectronic Technology Co., a Shenzhen-listed subsidiary of Tunghsu Group Co., said it refused to repay 1,97 billion yuan ($280 million) of principal and interest on a debt due to tight liquidity, after its bondholders had exercised a put option. It also skipped that bond's interest payment.
An official of the Tunghsu Group as well as a delinquent bond underwriter said the firm is speaking to bondholders to stretch the redemption date by six months. The business official also said the company was looking for a period of more than six months to stretch the coupon maturity date on a different loan.
According to the official agency and the underwriter for securities, bondholders have not yet reached an agreement on the date extensions.
Missed payments illustrate growing credit risks for Chinese private sector companies, which make up the majority of bond defaulters in the region. According to data compiled by Bloomberg, onshore defaults in China outside Tunghsu were at 110 billion yuan, similar to last year's full-year high of 122 billion yuan.
According to a filing on the Shenzhen stock exchange, Tunghsu Group's parent Dongxu Optoelectronic Investment Co. is now planning to sell its 51.46 percent stake in the company to Shijiazhuang Municipal Government's state-owned property oversight and administration. On Tuesday, trade in the stocks of the two listed companies of Tunghsu Group was suspended.
S&P Global Ratings said in a statement on Tuesday as it downgraded Tunghsu Group's credit rating to CCC - from B-, the transition of ownership is "highly uncertain" and could represent a change of command under the group's assured US dollar bonds.
This listed the worsening liquidity condition of the company and increased pressure to refinance the fall. "We assume that a default or distressed transaction is extremely likely to take place within the next six months, without substantial improvements in the circumstances of Tunghsu," S&P said.
Tunghsu Group's dollar bond due in 2020 was trading at around 44 dollars. The selling memorandum notes that if the parent guarantor of the company or any limited branch refuses to refund the principal amount of $10 million or more in due time, a cross-default will be caused on the bond.
According to its preliminary financial results, Tunghsu Group had 50.9 billion yuan of money and cash equivalent capital as of the end of June and a total liability of 129.1 billion yuan.
