Chinese Electronics Firm Misses Repayment of Local Bonds

Bloomberg News, Bloomberg News

Genuine bundles of Chinese one-hundred yuan banknotes are arranged for a photograph at the Counterfeit Notes Response Center of KEB Hana Bank in Seoul, South Korea, on Monday, Aug. 14, 2017. China's factory output and investment slowed somewhat in July, according to data released today, yet the yuan appeared not to take the data as negative, if in fact it's paying attention to it at all. , Bloomberg

(Bloomberg) -- A Chinese maker of electronic display panels has missed payment on two of its yuan bonds, a sign that the nation’s private firms continue to face a funding crunch amid an economic slowdown.

Tunghsu Optoelectronic Technology Co., a Shenzhen-listed unit of Tunghsu Group Co. said in a stock exchange announcement on Monday that it failed to repay 1.97 billion yuan ($280 million) principal and interest on a note due to tight liquidity, after its bondholders exercised a put option. It also missed interest payment on another bond.

The missed payments underscore rising credit risks among Chinese private sector firms, which form the majority of the country’s bond defaulters. Onshore defaults in China excluding Tunghsu were at 110 billion yuan, close to last year’s full-year record of 122 billion yuan, according to data compiled by Bloomberg.

Tunghsu Group’s parent Dongxu Optoelectronic Investment Co. is now planning to to sell its 51.46% stake in the company to State-owned Assets Supervision and Administration of Shijiazhuang Municipal Government, according to a statement on the Shenzhen stock exchange. Trading in the shares of Tunghsu Group’s two listed units were halted on Tuesday.

Tunghsu Group’s dollar bond due 2020 was indicated at around 50 cents on the dollar on Monday. Its offering memorandum states that a cross-default will be triggered on the note if the firm’s parent guarantor or any restricted subsidiary fails to repay principal amount of $10 million or more when due.

Tunghsu Group had 50.9 billion yuan cash and cash equivalent assets as of the end of June, and a total liability of 129.1 billion yuan, according to its interim financial results.

(Updates to add stake sale plan in 4th para)

--With assistance from April Ma.

To contact Bloomberg News staff for this story: Tongjian Dong in Shanghai at tdong28@bloomberg.net;Ina Zhou in Hong Kong at hzhou179@bloomberg.net;Yuling Yang in Beijing at yyang329@bloomberg.net

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