2015-05-26

Another Default: Coke Bottle Maker

Bloomberg: Another Chinese Company Says It Will Miss Full Bond Payment
A bottle maker in China said it won’t be able to fully repay a bond due May 28, raising concern it will become the third company to default in the onshore note market this year as the economy slows.
Zhuhai Zhongfu Enterprise Co., which supplies bottles for Coca-Cola Co. and PepsiCo Inc. in China, can only repay 148 million yuan ($23.9 million) of the 590 million yuan principal, according to a statement to the Shenzhen Stock Exchange Monday. It plans to pay all the 31.152 million yuan of interest. The manufacturer, which isn’t state-owned, sold the 5.28 percent securities in 2012.

...Zhuhai Zhongfu’s orders have declined significantly since 2012 as its biggest clients increased their own production of bottles, according to a report from China International Capital Corp. on May 11. The company’s business with its three largest clients Coca-Cola, PepsiCo and Uni-President China Holdings Ltd. generated only 33 percent of revenue last year, down from 49 percent in 2011, according to CICC. Coca-Cola remains the manufacturer’s biggest customer, according to board secretary Han.

The shift comes as Coca-Cola and PepsiCo are increasingly focusing on cost-cutting to help support operating margins amid waning soft-drink demand, according to Bloomberg Intelligence.

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