HONG KONG, April 8 (Reuters) - 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 since 2012.
“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 onshore obligations.
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