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China Minsheng Investment Can't Pay Bond as Debt Woes Deepen

China Minsheng’s Debt Woes Deepen Amid Repayment Uncertainty

(Bloomberg) -- A cash crunch at one of China’s best known conglomerates is getting worse as the company said it will not be able to pay its upcoming dollar notes.

China Minsheng Investment Group Corp.’s offshore unit said in a filing that it won’t be able to repay the principal, as well as the interest on the 3.8% $500 million bond due August, after considering its liquidity and performance. On Thursday, the property-to-financial conglomerate announced it only managed to repay part of the principal on a 6.5% 1.46 billion yuan note.

The development underscores the liquidity crisis that has been pressuring the Shanghai-based company that aspired to become China’s answer to JPMorgan Chase & Co. It will be the first time that the firm’s dollar bond creditors will miss out on repayment. Defaults have been on the rise among Chinese firms, with the tally continuing its ascent in tandem with the slowing economy.

CMIG in April said cross-default clauses were triggered on its dollar notes totaling $800 million. These include $300 million of debt that China Construction Bank Corp. repaid on the company’s behalf in June as the bank provided a standby letter of credit -- effectively a pledge to repay if the borrower can’t. Its dollar bond due next month was quoted around 50 cents on the dollar on Friday, down from about 75 cents earlier in the week, according to credit traders.

CMIG is the brainchild of Dong Wenbiao, the former chairman of China’s largest non-state bank who’s known as the “godfather” of the nation’s private sector. Dong convinced 59 private sector companies to join forces as the company’s founding shareholders. CMIG’s funding eventually dried up as its investments struggled and lenders pulled back because of tighter regulation.

The company said it’s actively seeking opportunities and is in discussions regarding possible disposals of certain offshore assets to improve the group’s current liquidity situation. It’s also planning to seek consent from its 2019 dollar bond holders to amend certain terms.

Here’s a timeline of events leading up to the latest news:

January 2019:

  • CMIG’s debt repayment difficulties first came to the fore earlier this year after it missed payment on a yuan bond. Since then it has managed to repay some of its local bonds with a delay

February:

  • Greenland Holdings Group acquired CMIG’s interest in a prime land plot in Shanghai
  • CMIG asked financial institutions to allow it a two-year buffer period while it sorts out its finances, and called on bondholders to restrain from exercising put options
  • Great Wall Asset Management said it would help China Minsheng Investment ease liquidity pressure, and optimize asset and liability structure

April

  • CMIG said cross defaults were triggered on its dollar bonds after missing payments and a potential demand by lenders of an affiliate for immediate repayment on a loan.
  • It appointed Kirkland & Ellis as legal adviser
  • CMIG said an onshore creditors’ committee, consisting of financial institutions, has been formed to stabilize the firm’s financial situation and maintain the group’s operations

May

  • CMIG said it was addressing its liquidity issue through debt and business restructuring and introduction of strategic investment, according to local media report

June

  • China Construction Bank Corp. repaid a $300 million bond on company’s behalf as the notes were backed by a standby letter of credit from the lender
  • CMIG said it won’t rule out seeking new investors for its 1 billion yuan 7.50% notes, when existing bondholders exercise put option on July 26

--With assistance from Ina Zhou.

To contact Bloomberg News staff for this story: Tongjian Dong in Shanghai at tdong28@bloomberg.net

To contact the editors responsible for this story: Neha D'silva at ndsilva1@bloomberg.net, Lianting Tu

©2019 Bloomberg L.P.

With assistance from Bloomberg