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China will start selling the first batch of its 1 trillion yuan ($138 billion) of ultra-long special sovereign bonds this week, as officials ramp up efforts to support the world’s No. 2 economy.
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May 18, 2018
, Bloomberg News
(Bloomberg) -- Hsin Chong Group Holdings Ltd. is set to become the second Asian company to default on its U.S. dollar bonds this year, the latest sign of rising borrowing costs impacting weaker firms’ ability to repay debt.
The Hong Kong-listed builder anticipates it won’t pay the $300 million 2018 notes due today and has engaged with noteholders and their advisers to find a consensual solution, according to an exchange filing late Thursday. It has also engaged holders its notes due 2019 as the nonpayment on 2018 notes will constitute an event of default. Commodity trader Noble Group Ltd. was the first Asian company to default on dollar bonds this year, according to data compiled by Bloomberg.
The imminent failure to repay debt shows refinancing avenues are narrowing for weaker companies amid a jump in funding costs. The cost of borrowing for Asia’s junk-rated issuers climbed about 1.5 percentage points since October to a near a two year high of 7.58 percent, according to ICE BofaML index.
“The whole refinancing environment is tough for weak borrowers in general, whether they are from China or Hong Kong,” said Christopher Lee, managing director of corporate ratings at S&P in Hong Kong. “The onshore and offshore markets have turned cautious on small and weak firms as liquidity tightens, funding cost increase against large maturities coming due in the next 6 to 18 months. ”
Hsin Chong’s shares have been suspended from trading for over a year. It had HK$1.8 billion ($229 million) of loans from Hong Kong institutions and 8.1 billion yuan ($1.3 billion) from Chinese lenders on April 30, according to the filing. The company is in discussions with its lenders to manage its overdue debt and failure to repay the dollar bonds will trigger events of default on loan agreements, it added.
Hsin Chong has earlier hired Moelis & Co. as a financial adviser and Kirkland & Ellis as its legal adviser in April to assess its capital structure.
To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net;Judy Chen in Shanghai at xchen45@bloomberg.net
To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Neha D'silva
©2018 Bloomberg L.P.
