Debt Woes at Large China Companies Mount Amid Payment Stress

(Bloomberg) -- The debt pain engulfing some of China’s big conglomerates has intensified in recent days with more bond defaults, asset freezes and payment uncertainties.

China Minsheng Investment Group Corp. said last week cross defaults had been triggered on dollar bonds worth $800 million. Lenders to HNA Group Co.’s CWT International Ltd. seized control of assets in Singapore, China and the U.S. after the unit failed to repay a loan, according to a filing last night. Citic Guoan Group Co., backed by a state-owned company, isn’t certain whether it can pay a bond coupon due on April 27.

The increased repayment stress sweeping some of China’s biggest corporations is a sign that the liquidity crunch -- induced by a two-year long deleveraging campaign -- is far from over despite an improving economy. Bonds from at least 44 Chinese companies totaling $43.7 billion faced repayment pressure as of last week, a 25 percent jump from the tally at the end of March, according to company and ratings firm statements compiled by Bloomberg.

“The debt crisis at conglomerates can have more of a contagion impact on the corporate bond market compared with an average corporate default because those issuers typically have more creditors and large amount of outstanding debt,” said Li Kai, a multi-strategy investment director at Genial Flow Asset Management Co.

Click here to read what analysts say about these distressed debt events.

China Minsheng Investment

The private sector giant’s $300 million bond due 2020 and its $500 million note due 2019 were put under default after an announcement that lenders of its affiliate Yida China Holdings Ltd. may demand an immediate payment of about 4.3 billion yuan ($641 million) of loans, according to a stock filing on Thursday. The company has appointed Kirkland & Ellis as its legal adviser. Yida said Monday the amount banks may demand it repay rose to 8.8 billion yuan.

CMIG’s debt troubles first came to the fore when it shocked investors with a missed bond payment in January after it ran into trouble raising new debt. The company repaid a local note Monday night after a delay. Its dollar notes due 2019 were indicated around 46 cents on the dollar Tuesday morning, up from a record low of 40 cents on Thursday, according to traders.

Investors in CMIG’s 2 billion yuan privately placed bonds can require early redemption on April 27. The company also has a 1.5 billion yuan note due on May 28.

HNA Group

Lender’s of HNA’s unit CWT International Ltd. seized assets including shareholdings of logistic company CWT Pte, investment properties in the U.S. and golf courses in China, according to a statement on Monday. Lenders had threatened to take control of the assets unless CWT made payments by 9 a.m. on April 17 tied to a HK$1.4 billion ($179 million) loan taken out in September.

HNA units have rarely disclosed threats of imminent asset seizures despite having missed payments in the past. CWT, which had almost HK$25 billion of assets at the end of 2018, said it’s been negotiating with lenders. The missed payment led to a cross default under a term-loan facility, which has about HK$766 million outstanding, CWT added.

CWT Pte repaid a S$100 million bond last week and it has a S$100 million note coming due in March next year.

Citic Guoan Group

Citic Guoan Group sees uncertainty over payment of a 195 million yuan bond coupon due April 27 because of tight liquidity, according to a statement to Shanghai Clearing House Monday. The firm was downgraded two levels to A by China Lianhe Credit Rating on Wednesday after nine more assets of the company were frozen between March 19 and April 12. This followed seizures of its shares in two listed companies due to lawsuits.

The latest blow was from the Beijing Municipal Higher People’s Court, which on April 18 ordered a freeze on the company’s entire 36.44 percent stake in Shenzhen-listed Citic Guoan Information Industry Co., the unit said in a statement Friday.

--With assistance from Carrie Hong and Yuling Yang.

To contact Bloomberg News staff for this story: Lianting Tu in Hong Kong at ltu4@bloomberg.net;Jing Zhao in Beijing at jzhao231@bloomberg.net

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

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With assistance from Bloomberg