China’s first junk bond default highlights risk | beyondbrics

China’s first junk bond default highlights risk | beyondbrics:



"A manufacturer of construction materials has become the first Chinese company to default on a domestic junk bond, a state-owned Chinese newspaper said on Tuesday, compounding investor concerns over which mainland issuers could be next to miss debt repayment obligations.



Xuzhou Zhongsen Tonghao, based in the prosperous but highly indebted province of Jiangsu, was unable to meet interest payments on Rmb180m (US$29m) in bonds it sold to domestic investors last year, according to the 21st Century Business Herald, a state-owned newspaper. The missed interest payment was estimated at Rmb18m, given the 10 per cent coupon on the bond, and took place last Friday.



The missed payment, if confirmed, would become the second default in three weeks in China’s Rmb8.5tn onshore corporate bond market following the failure of Shanghai Chaori Solar Energy to make an Rmb89.8m payment on an Rmb1bn bond in March. Chaori’s bond, unlike Xuzhou Zhongsen’s, was not classified as junk."



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