China solar cell maker temporarily delists bond amid market debt worries

SHANGHAI, March 20 Thu Mar 20, 2014 3:00am EDT

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SHANGHAI, March 20 (Reuters) - The Shanghai Stock Exchange ordered loss-making Chinese solar cell maker Baoding Tianwei Baobian Electric Co Ltd to temporarily delist its 2011-issued "11 Tianwei Bond" from Friday, the company said.

A filing to the exchange on Thursday did not explain the suspension and the company could not be reached immediately for comment.

The suspension follows news earlier this month of China's first domestic bond default, triggered when solar equipment producer Shanghai Chaori Solar Energy Science and Technology Co Ltd could not make an interest payment.

Chinese authorities have signalled that they are now more willing to let banks and other investors take losses on loans, raising doubts about the long-held assumption that bonds carry an implicit government guarantee.

Trading in the Tianwei Baobian bond has been suspended since the firm announced on March 10 that it had posted a loss of 5.23 billion yuan ($844.51 million) for 2013 for the second straight year of losses. Two years of losses meant the Shanghai exchange could demand the bond's listing is suspended.

The "11 Tianwei Bond" was issued in 2011 with a coupon of 5.75 percent. Due to mature in 2018, the bond's total value is 1.6 billion yuan ($258.21 million), Reuters data shows.

By the time trade was suspended on March 11, the bond's yield had shot up to 11.26 percent from 6.61 percent at the start of the year.

The company said in a filing on March 13 it will pay interest on the bonds owed from July 11, 2013 to July 10, 2014. It said those payments would be made by July 11 this year.

A massive run-up in China's corporate debt since 2008 - and overcapacity in sectors such as steel, coal and solar - have raised concerns about the country's credit risks.

Small property developer Zhejiang Xingrun is struggling with payments of up to 3.5 billion yuan to banks and individual investors, domestic media reported, citing officials.

China's solar industry has suffered from severe overcapacity and falling prices for photovoltaic cells, while the government has been embroiled in a trade war with the United States and the European Union.

Shanghai exchange has not given Tianwei Baobian a "buffer" period for trading the bond. In similar cases before, authorities gave issuers a grace period of trading before the listing was formally suspended.

The "11 Chaori Bond" was given a 30-day grace trading period before being temporarily delisted on July 8 last year. ($1=6.12 yuan) (Reporting by Adam Jourdan; Editing by Neil Fullick)

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