SHANGHAI (Reuters) - Ratings agency China Chengxin International on Friday downgraded CEFC Shanghai International Group Ltd by a notch to its lowest rating of “C” after the company defaulted on bond interest payments due June 21.
CEFC Shanghai said on Thursday it was unable to make payments totaling 197 million yuan ($30.33 million) on the 2.5-billion-yuan perpetual bond. It added that media reports on the chairman of its parent, the troubled CEFC China Energy, had negatively affected its business operations.
In a statement posted to its website, China Chengxin also cut its rating on the bond by a notch to “C” from “CC”.
According to the agency’s website, a “C” rating indicates a basic inability to guarantee the repayment of debts.
CEFC Shanghai faces 2.1 billion yuan in principal and interest payments for nine-month commercial paper maturing June 25. It has previously warned it was uncertain of its ability to make those payments.
The company’s ability to service its debt has come into focus following reports in February that China CEFC Chairman Ye Jianming was under investigation for suspected economic crimes.
China Lianhe Credit Ratings Co downgraded CEFC Shanghai’s long-term issuer rating to its lowest level of C on May 22.
The defaults by CEFC Shanghai come amid a rise in corporate bond defaults in China. Year to date, 11 Chinese companies have defaulted on principal or interest payments on 20 bonds worth a combined 19.9 billion yuan, according to Reuters data.
That compares with defaults on payments on 26 bonds worth a combined 26 billion yuan in 2017.
Reporting by Andrew Galbraith; Editing by Himani Sarkar