A missed interest payment on an offshore bond by a People’s Republic of China state-owned aluminium firm has prompted ratings agency S&P Global Ratings to put it on “negative” watch earlier this week.
Qinghai Provincial Investment Group Ltd (QPIG) failed to make the US$300 million installment payment on February 22, leading S&P to downgrade it from B+ to CCC+ and assigning it to negative watch four days later.
Though a missed payment by a Chinese-owned company is highly uncommon, S&P declined to call it a “default,” opting instead to give the company to March 1 to correct the issue under the guise of an “imputed” grace period.
According to S&P, the liquidity risk “remains high even after the company’s repayment.” As yet the firm has not issued a refinancing plan for its US$19.4 million in coupon payments and US$598.68 million in trust loans and financial leases, all of which are scheduled to come due over the course of the next six months.
“We are therefore keeping our ‘CCC+’ ratings on QPIG on CreditWatch with negative implications,” explained S&P.
For its part, QPIG cited “technical reasons” for the nonpayment, but it continued by assuring the market that it is “in the process of full payment.” A statement from earlier this week echoed these comments.
The year so far has witnessed 15 Chinese companies default on payments to 14 onshore bonds totaling CNY12.1 billion according to data published by Reuters. QPIG’s delay in payment is not the year’s first either, as state-run China Minsheng Investment Group failed to pay on a maturing private placement note when it came due on January 29. The firm said later that it tendered payment on February 14, at the end of an extended deadline.
Corporate liquidity problems by Chinese firms this year are a likely carry-over from 2018, which saw 46 missed payments on 120 bonds. Tepid economic growth, a reigning in of shadow financing, and a shyness from banks to lend to private companies were the likely catalysts according to experts.