China’s state-owned aluminium producer Qinghai Provincial Investment Group Co. failed to make a scheduled coupon payment on a dollar bond this week, and analysts say the missed payment may be a sign that the firm’s recent debt restructuring has not made its financial situation any better.
According to financial media, Qinghai Provincial failed to wire funds to cover a coupon on its US$300 million 2020 note that came due on Thursday. An anonymous source told Bloomberg that the company is negotiating with financial institutions in an effort at gathering funds to make a delayed payment.
For its part, queries to a phone number to the Qinghai Provincial corporate office by Bloomberg went unanswered.
Despite the bond’s terms allowing for no grace period, Qinghai Provincial made a late payment on the same bond in February, saying the extra time was needed due to a lack of cash. The firm made an on-time payment on a different bond in the intervening months, but S&P Global Ratings says the company continues to rely upon government funding to repay debt.
“Missing the dollar bond coupon payment reflects its worsening financial pressure,” Pacific Securities Co. credit analyst Li Yunfei told Bloomberg. “In the short term, the company can only count on a government-led debt restructuring to solve its liquidity problems. Yet it is still uncertain at the moment whether and how the government will support the company.”
Anonymous sources revealed that the firm’s creditors committee, which is led by China Development Bank and China Construction Bank Corp., convened last month. Qinghai Provincial has allegedly been in discussions with China Development Bank to replace a portion of its debt with lower-cost funding, as CSCI Pengyuan Credit Rating reported that the firm is under tremendous pressure to make good on outstanding debts.
The credit rating agency said Qinghai Provincial’s weak cash flow, when coupled with currency exchange losses on a dollar bond repayment, have placed the company on shaky financial ground.