Regulatory Pressure Mounts on Coal Miner that Rattled China's Bond Market
25 Novembro 2020 - 8:54AM
Dow Jones News
By Chong Koh Ping
An investigation into a troubled Chinese state-owned coal miner
was escalated to the country's securities regulator, as authorities
pile pressure on the company whose recent default rattled the bond
market.
The National Association of Financial Market Institutional
Investors, a self-regulating body supervised by China's central
bank, said late Tuesday that it had sent leads related to suspected
violations of laws and regulations by Yongcheng Coal &
Electricity Holding Group Co. to the China Securities Regulatory
Commission. The industry group said it would also impose
unspecified sanctions on the company and start an investigation
into its parent, an energy and chemicals conglomerate.
Yongcheng Coal missed a deadline earlier this month to repay 1
billion yuan, equivalent to $152 million, in 270-day commercial
paper that matured Nov. 10, after having sold new debt just weeks
earlier. The company had also transferred some assets, including
stakes in a local bank and several chemical firms, to other local
state companies.
The miner's failure to make the debt payment and recent bond
defaults by an automotive business and a chip maker have caused
unease among investors, sending yields on riskier corporate bonds
higher. Yields rise as bond prices fall.
Yields on three-year Chinese corporate bonds with double-A
credit ratings--a grade that in China's domestic rating system
indicates a significant amount of risk--rose to more than 4.482% on
Tuesday, their highest since December 2018, according to Wind. They
edged down slightly to 4.479% Wednesday but are still significantly
higher than a few weeks ago.
In comparison, yields on triple-A-rated three-year corporate
bonds fell slightly to 3.881%. Three-year Chinese government bonds
were yielding 3.085% Wednesday, according to Wind.
Chinese authorities have taken a tough stance on the recent
defaults, in what analysts say are attempts to quell investor
worries about wider liquidity problems among state-owned
enterprises. China's top financial body, chaired by Vice Premier
Liu He, President Xi Jinping's point person on economic and
financial issues, warned over the weekend that it would show zero
tolerance for misconduct in the debt markets.
On Tuesday, Yongcheng Coal and the main underwriters of its
commercial paper said in regulatory filings that all 31 holders of
the debt have agreed on a repayment plan. The company, whose parent
is owned by the Henan provincial government, said it would repay
half of the 1 billion yuan to creditors and roll over the rest for
another 270 days.
The 4.39% interest rate on the debt will remain unchanged during
the extension period, and repayment of the rest of the principal
and interest will be done in a lump sum.
The company still has liquidity problems. Yongcheng Coal
separately said earlier this week that it wasn't able to repay two
other short-term debt issues totaling 2 billion yuan that recently
matured. The company said the coronavirus pandemic has taken a
negative toll on its business operations and that it has had
difficulties raising funds in the bond market.
Chang Li, a Beijing-based director at S&P Global Ratings,
said he expects regulators to take further steps to address
investor concerns on information disclosure and poor governance at
companies, including state-owned enterprises, as market confidence
has been shaken by the recent string of credit events.
"The Chinese authorities have shown increased tolerance of SOE
defaults in recent years and have been encouraging market-based
debt restructuring while cracking down on financial misconduct to
mitigate potential systemic risk," he said.
Mr. Li added that he doesn't expect the recent string of SOE
debt problems to lead to widespread issues in China, as debt
defaults still make up less than 1% of outstanding corporate
bonds.
Xing Zhaopeng, a China markets economist at ANZ in Shanghai,
said the recent weekend meeting of financial regulators and recent
regulatory moves show how authorities are trying to stabilize the
markets.
"This wave of shock brought by the surprising defaults by state
companies like Yongcheng has ebbed," Mr. Xing said, adding that is
a promising sign that creditors were able to recoup half the value
of the debt that went unpaid earlier.
"But overall, these incidents are like wake-up calls" for
investors to be cognizant about default risks," he said.
Xie Yu contributed to this article.
Write to Chong Koh Ping at chong.kohping@wsj.com
(END) Dow Jones Newswires
November 25, 2020 06:39 ET (11:39 GMT)
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