HONG KONG, April 8 Chinese coking coal company
Winsway will make the coupon payment on its $309
million bonds maturing 2016 which falls due on Tuesday, it said.
The 8.5 percent bonds due 2016 trade at
around 50 cents on the dollar, a level considered stressed, amid
concerns about tumbling commodity prices.
"Our cash flow from operation this year is HK$3.2 billion
($410 million), so there is no problem with paying HK$200
million in interest costs," Laura Shi, investor relations
director of Winsway, told Reuters.
The company had issued $500 million in bonds in 2011 with a
coupon of 8.5 percent, of which $309 million is still
outstanding following a bond buyback by the issuer.
These bonds have been depressed and have traded around 50
cents on the dollar following a plunge triggered by the slide in
global coal prices, resulting in two successive years of losses
"If the bond is trading at these levels, bondholders will
pay close attention to coupon payments," said a Hong Kong based
distressed debt analyst, requesting anonymity because he is not
authorised to speak to media.
"The current yield is pretty high and if you buy the bond
you take on principle risk. You might get 2-3 coupons but what
if you don't get back your principle?" he said, while adding
that the buyback conducted by the company in October last year
had instilled some confidence in bond investors.
Although offshore bond defaults have occurred in the past,
the issue of growing credits risks in China have been
highlighted by recent landmark failures by borrowers to meet
Last month, China recorded its first domestic bond default
when loss-making solar equipment producer Chaori Solar missed an
interest payment. This was followed by a second default this
month when Xuzhou Zhongsen, a small construction materials
company failed to pay interest on its bonds.
Ratings agency Standard & Poor's estimates overall debt in
China reached 213 percent of GDP last year, up sharply from 140
percent in 2007. Corporate debt comprises the bulk of this total
and overcapacity in sectors such as steel, coal and solar
energy, have threatened the solvency of many borrowers.
($1 = 7.8 Hong Kong dollars)
(Reporting by Grace Li and Umesh Desai; Editing by Mark Potter)