Caixin
Jul 20, 2019 05:23 AM
FINANCE

Investment Group CMIG to Miss $500 Million Debt Repayment

CMIG in April said cross-default clauses were triggered on its dollar notes totaling $800 million. Photo: VCG
CMIG in April said cross-default clauses were triggered on its dollar notes totaling $800 million. Photo: VCG

(Bloomberg) — A cash crunch at one of China’s best-known conglomerates is getting worse as the company said it will not be able to pay its dollar notes coming due next month.

China Minsheng Investment Group Corp.’s offshore unit said in a filing that it won’t be able to repay the principal and interest on its 3.8% $500 million bond due in August, after considering its liquidity and performance. The property-to-financial conglomerate said Thursday it managed to repay only part of the principal on a 6.5% 1.46 billion yuan ($212.3 million) note.

The development underscores the liquidity crisis that has been pressuring the Shanghai-based company that aspired to become China’s answer to JPMorgan Chase & Co. It will be the first time that the company’s dollar bond creditors will miss out on repayment. Defaults have been on the rise among Chinese businesses, with the tally climbing in tandem with slowing economic growth.

CMIG in April said cross-default clauses were triggered on its dollar notes totaling $800 million. These include $300 million of debt that China Construction Bank Corp. repaid on the company’s behalf in June as the bank provided a standby letter of credit — effectively a pledge to repay if the borrower can’t. Its dollar bond due next month was quoted Friday around 50 cents on the dollar, down from about 75 cents earlier in the week, according to credit traders.

CMIG is the brainchild of Dong Wenbiao, the former chairman of China’s largest nonstate bank who’s known as the “godfather” of the nation’s private sector. Dong persuaded 59 private-sector companies to join forces as the company’s founding shareholders. CMIG’s funding eventually dried up as its investments struggled and lenders pulled back because of tighter regulation.

The company said it’s actively seeking opportunities and is in discussions regarding possible disposals of certain offshore assets to improve the group’s liquidity situation. It’s also planning to seek consent from its 2019 dollar bond holders to amend certain terms.

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