Tuesday, October 13, 2015   

China solar firm sets off debt default alarm
(03-05 14:41)

A Chinese solar company is threatening not to pay interest on a corporate bond, setting off alarms in the financial system, but analysts said a default could improve transparency.
Shanghai-based Chaori Solar Energy Science & Technology Co. said it was unable to make interest payments of 89.8 million yuan due Friday on a bond issued in 2012, according to a statement issued late Tuesday through the Shenzhen stock exchange where it is listed.
Some analysts have described it as China's first default for an onshore corporate bond.
The China Business News said it was the country's first “substantive'' default since a steel company, Angang, had previously delayed interest payments and so-called “collective bonds'' issued by groups of small enterprises had also missed payments.
But analysts said a Chaori default would help build a healthier market in the long term.
“It's a good thing, as a normal economy needs those defaults to better price bonds and other debt products,'' said Lu Ting, an economist for Bank of America Merrill Lynch.
“Defaults of some debt products are definitely not on a similar scale to a collapse of a major financial institution,'' he said in a research note. “Corporate bonds and incoming trust loan defaults won't lead to credit crunch.''
The news came after worries earlier this year over financial products issued by China's roughly 65 trusts, which have drawn comparisons to American “junk bonds'' of the 1980s.
In one case a US$160 million investment product structured by Jilin Province Trust and backed by a coal firm failed to repay capital and interest five times by mid-February.
Separately, a US$500 million investment product structured by China Credit Trust avoided default after an unknown party made good on principal payments to hundreds of investors, though they have not received pledged interest.
That product was also backed by a loan to a coal firm, and sold by China's largest bank ICBC.
Zhang Gang, an analyst with Central China Securities, said of Chaori: “In the short term there will be some impact, but as to the whole financial system, the emergence of some defaulting companies will help everyone raise their risk expectations.''
Chaori has been suspended from trading on Shenzhen's small- and medium- enterprise board since February 19. It last traded at 2.59 yuan.
Other Business breaking news:
Ernst & Young in the crosshairs for fraudster Madoff’s scam (1 hr ago)
German investor confidence takes a beating (2 hrs 16 mins ago)
Hang Seng drops, Shanghai climbs (10-13 16:31)
London stocks lower after China data (10-13 16:18)
HK, China stocks fall (10-13 13:17)
China exports and imports weaken further (10-13 12:16)
Dell in US$67b deal to buy EMC (10-12 20:29)
Ford plows US$1.8b into China to develop advanced auto technologies (10-12 19:53)
Glencore to offload copper mines in Australia and Chile (10-12 18:38)
Ex-banker Falciani who lifted lid on HSBC Swiss unit tax dodger accounts, skips trial (10-12 18:20)

More breaking news >>

© 2015 The Standard, The Standard Newspapers Publishing Ltd.
Contact Us | About Us | Newsfeeds | Subscriptions | Print Ad. | Online Ad. | Street Pts


Home | Top News | Local | Business | China | ViewPoint | CityTalk | World | Sports | People | Central Station | Spree | Features

The Standard

Trademark and Copyright Notice: Copyright 2015, The Standard Newspaper Publishing Ltd., and its related entities. All rights reserved.  Use in whole or part of this site's content is prohibited.   Use of this Web site assumes acceptance of the
Terms of Use, Privacy Policy Statement and Copyright Policy.  Please also read our Ethics Statement.