Caixin
Mar 06, 2021 06:02 PM

Another State-Backed Coal Firm Misses Bond Payments as Regulator Pledges ‘Zero Tolerance’

What’s new: State-owned coal company Jizhong Energy Group Co. Ltd. missed part of its payments on two bonds that came due Friday, several of its bondholders told Caixin.

Jizhong Energy, backed by the Hebei provincial government, transferred the principal of 500 million yuan ($77 million) of one bond but failed to pay the interest, meaning Shanghai Clearing House was unable to distribute the money to bondholders. For a different bond, the coal miner missed the payment entirely, Caixin understands.

One bondholder source said the Hebei government had helped Jizhong Energy obtain funds from a state-owned enterprise (SOE) credit protection fund, but because of the short notice the money arrived too late. “They are supposed to pay on Monday,” the source said.

The background: Jizhong, which is one of China’s ten largest coal firms, has gone down to the wire with bond payments previously. In November, it made last-minute payments (link in Chinese) for two of its bonds — one with a 2 billion yuan principal that had matured, and another which had interest due. In January, Jizhong made a last-minute payment for another bond.

In November, a wholly-owned logistics subsidiary of Jizhong Energy failed to repay the principal and interest of a 500 million yuan trust loan, but coughed up the dough a few days after it was due.

Friday’s missed payments added to investor concerns about hidden risks in China’s bond market, and exemplified debt-ridden SOEs’ struggles to avoid defaults amid a regulatory crackdown on misconduct in the bond market.

Another state-backed coal miner, Yongcheng Coal and Electricity Holding Group Co. Ltd., defaulted on a 1 billion yuan bond on Nov. 10, sending shockwaves through the market, triggering selloffs of some SOE bonds and driving some companies to cancel planned issuances. It also drew the ire of China’s top financial regulator, which in November pledged "zero tolerance" for misconduct after revelations that Yongcheng may have defaulted intentionally in an effort to dodge its debt.

Related: Cover Story: How SOE Default Wave Shows State Bailouts Are Over

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full Caixin article in Chinese, click here.

This story has been updated to correct the time when China’s top financial regulator pledged “zero tolerance” for financial misconduct. It was in November.

Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Flynn Murphy (flynnmurphy@caixin.com)

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