(Bloomberg) -- State-backed Shanghai Industrial Financial Leasing informed some investors that it might not have enough cash to repay a bond due Aug. 3 and is considering alternative plans, according to people familiar with the matter.
The company proposed to some bondholders earlier this month to cancel the note ahead of the due date to avoid a default, one of the people said, asking not to be identified discussing a private matter. The firm sought their support to swap the bond obligation to private debt — also known as non-standard debt — to be repaid at a later date, the person added.
The leasing firm has yet to offer any credit enhancement for the debt and did not provide details of the payment schedule, the person added. Separately, the note’s underwriter plans to hold a bondholder meeting soon to discuss possible options. For those who don’t want to swap the debt, there may be another extension plan, added the person. Talks are still ongoing and no decision has been made, the person said.
This case illustrates that the liquidity strain seen among Chinese debt-ridden developers could spread as the country’s economic growth continues to slow.
The company’s 7% bond has 400 million yuan in principal value, according to Bloomberg-compiled data. Trading in the note was suspended from Monday by the Shanghai Stock Exchange, citing uncertainty of major events, according to a notice on the bourse’s private disclosure platform that was seen by Bloomberg News.
Officer in charge of information disclosure at the leasing firm didn’t reply to an email seeking comment. Calls to the main lines of the company and its state-owned shareholder — Shanghai Industrial Investment (Holdings) Co. — went unanswered.
Shanghai Industrial Financial’s leasing business spans a range of industries from infrastructure and aviation to airports and ports, according to its most recent annual report released in May 2023.
It had a cash position of 88 million yuan ($12.1 million) at the end of 2022, down 81% from the previous year, and short-term liabilities of 4 billion yuan, according to its 2022 annual report.
©2024 Bloomberg L.P.
