Extremely Tight Liquidity Forces AA Default in Beijing

A company has 600 million in 3-year debt issued in June 2016. Buyers have a put option at 2-years. Investors with only 2.915 million exercised their put options and this led to a default by AA rated 中融双创(北京)科技集团

中国经济网: 第十家现身 今年新增违约主体有三类
On June 14th, Zhongronghuangchuang announced that “16 Great Wall 01” should pay interest on June 13 and redeem part of the principal of the sale. As of now, the company has already transferred part of the principal amount of RMB 2.915 million to the custodian institution. It has not yet been able to transfer the interest of “16 Great Wall 01” in the current period to the custodian institution according to the agreement. The company strives to complete the conversion of the bonds as soon as possible. As a result, “16 Great Wall 01” has constituted a breach of contract, and Zhongronghuangchuang has become the tenth new breach of contract subject since this year.

According to public information, the “16 Great Wall 01,” which was in breach of contract, was dubbed as Zouping Great Wall Group Co., Ltd. 2016 corporate bonds (the first period). It was a general corporate bond and was issued in June 2016 with a scale of 600 million yuan. In 3 years, with the end of the second year, the issuer raised the coupon rate option and the investor’s option to sell back. Zouping Great Wall Group is the former name of Zhongronghuangchuang. It was changed to the current name in February this year. The nature of the enterprise is private enterprise. On June 13th, it was the first interest payment date of “16 Great Wall 01” after the company’s name change, and it was also the implementation date of the sale back.

Zhongronghuangchuang made the breach more sudden. "16 Great Wall 01" issued its main body and debt credit rating is AA. 2017 Dagong issued a follow-up rating, maintaining the AA / AA rating of Zouping Great Wall Group / "16 Great Wall 01", the outlook is stable. As of the June 13 bond default, no rating agencies issued rating adjustment announcements.

It is worth noting that in February of this year, the original Zouping Great Wall Group set out to conduct a series of business and asset adjustments: first selling its textile business entity, acquiring an agricultural company and an aluminum can manufacturing company, and subsequently changing the company name, Registered capital, residence, business scope. After the change, the company's business scope has undergone great changes.

On May 2nd, Zhongronghuangchuang announced the implementation of the "16 Great Wall 01" implementation method for reselling, and announced that the annual coupon rate for the last year of the bond was raised from 7.05% to 7.5%. At this time, the issuance interest rate for one-year AA short-term financing in the market is about 7%.

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