China Minsheng Investment Company, a cash-strapped private investment giant, said last week that it was analyzing the effect of an onshore debt crisis on its other commitments, sounding an alarm for its offshore creditors.
In a Hong Kong exchange filing last Monday, CMIG reported that on February 14, after reaching an agreement with bondholders to extend the original repayment date from January 29, it had redeemed a Rmb3bn (US$443m) onshore bond.
It did, however, state that it was still determining whether this would trigger cross-defaults on its other loans and bonds.
Since it lacks assurances, a US$500m 3.8 percent bond maturing in August this year has faced the most pressure.
According to Refinitiv numbers, the bond was quoted at 82.50 on Friday, having slumped to 55.00 following the missed onshore redemption. On the other hand, CMIG has a US$300m 3.25 percent bond due July 2020 as the keepwell supplier, plus a China Construction Bank standby letter of credit.
According to Refinitiv info, the bond was quoted at 98.13. Ivan Chung, vice-president of Moody's, said that offshore creditors would usually not request immediate repayment after a technical default with no sign of credit deterioration, but would be willing to request repayment from distressed issuers with such negative details floating around and a considerable amount of debt falling due.
According to Refinitiv reports, CMIG has Rmb34.75bn of renminbi bonds outstanding. Of that number, this year, Rmb23.26bn of bonds will mature.
According to people involved in the talks, the firm is talking to potential strategic partners and selling its interests in a variety of companies, including real estate and healthcare leasing, although several proposals have yet to materialize.
Whether CMIG will raise new debt to refinance its maturities is not clear. Regulators do not prohibit a company from borrowing further to repay old debt in the offshore market, but this may not be a good choice.
Helping the conglomerate arrange financing on a timely basis would have little impact,” said a Shenzhen-based lawyer who declined to be identified.
Moody's downgraded property developer YIDA CHINA HOLDINGS from B3 to Caa1 and its senior unsecured bonds to Caa2 from Caa1 on Tuesday. CMIG is the parent of Jiayou (International) Investment, the largest shareholder of Yida.
Moody's said if its liquidity profile deteriorated further, Yida's ratings could be further downgraded.
This followed S&P’s downgrade of the company to CCC+ from B– and its bonds to CCC from CCC+ on February.
S&P said Yida faced refinancing difficulties, with Rmb6.2bn of debt due this year, including Rmb2bn of bond maturities in March, adding that CMIG had cancelled plans to subscribe to new Yida shares last year.
According to Refinitiv numbers, Yida's US$300m bonds due April 2020 were bid at 74 on Friday. Yida and its bonds are rated by Fitch at B.