Two China Firms’ Dollar Bonds Sink in Shandong as Woes Grow

(Bloomberg) -- Two companies based in China’s Shandong province saw their dollar bonds plunge on Thursday amid signs that their debt troubles are worsening.

Shandong Ruyi Technology Group Co.’s dollar bond due in December plunged by 11.2 cents on the dollar to 77 cents as of 5:24 p.m. in Hong Kong, its biggest drop on record, according to Bloomberg-compiled prices. Shandong Yuhuang Chemical Co., another firm from the same province, saw its dollar bond due in March drop by 13.6 cents to 59 cents, also a record drop for the note, the data show.

Both bonds dropped amid investor concern over their repayments. Debtwire reported late on Wednesday citing unnamed sources that Ruyi had appointed Houlihan Lokey Inc., without specifying its role. The report also cited a Ruyi spokesperson as saying that it had consulted with Houlihan Lokey for general financial services and that the management remains committed to repaying on time its dollar bond due next month.

Bloomberg’s calls to Ruyi went unanswered and Houlihan Lokey declined to comment.

Yuhuang’s 6% 500 million yuan ($71 million) bond was suspended from trading from Nov. 21 because of a “major event,” the company said in an exchange filing. It’s due to repay almost all that bond principal on Thursday after bondholders exercised a put option. S&P Global Ratings downgraded Yuhuang to CC from CCC+ on the same day, citing high near-term risk of default the company’s maturing debt.

The two firms add to a growing list of distressed companies in the eastern Chinese province. In late October, steelmaker Xiwang Group Co., also based in Shandong, said it failed to repay a local bond after a ratings company warned in the previous month that the firm faces heightened pressure to repay debt in the final quarter.

Amid the Ruyi and Yuhuang’s bond plunge, Shandong Sanxing Group Co.’s dollar bond due 2021 also fell 5.6 cents, its biggest drop in more than two months.

Shandong’s privately owned companies are frequent users of cross guarantees, which has the potential to send one company’s liquidity issues cascading through the credit system, S&P Global Ratings said in a note last month.

--With assistance from Annie Lee.

To contact the reporter on this story: Ina Zhou in Hong Kong at hzhou179@bloomberg.net

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

©2019 Bloomberg L.P.