Thu, Sep 17, 2015 - Page 15 News List

Chinese machine maker CNEG says it could default


A unit of China’s biggest state-owned machinery company may be unable to make interest payments on a bond, it said, as slowing growth heightens default risks among heavily-indebted firms.

China National Erzhong Group Co (CNEG, 中國二重集團), which makes metal smelting equipment, might miss an interest payment on a 1 billion yuan (US$157 million) five-year bond issued in 2012, it said in a statement late on Tuesday, without giving an amount.

Chinese authorities say they are trying to reform the lumbering, inefficient industrial giants of the state sector, but the process is slow and obstructed by vested interests.

CNEG is a subsidiary of China National Machinery Industry Corp (中國機械工業集團), the nation’s biggest state-owned machinery company and one of about 110 major state-owned firms under the direct central government management.

Investors have asked a court in Sichuan Province, where CNEG is based, to restructure the firm as it “clearly lacks the ability to pay,” the statement said, adding the interest payment was due on Saturday next week.

China has already seen bond defaults this year as the nation’s slowing growth pressures companies.

In April, power equipment maker Baoding Tianwei Group Co (保定天威集團) said it had failed to make a coupon payment of 85.5 million yuan, said to be the first bond default by a state-owned firm.

Also in April, privately owned technology firm Cloud Live Tech Group (中科雲網科技集團) said it was unable to pay both principal and interest on a five-year, 480 million yuan bond issue sold in 2012.

The Shanghai stock exchange delisted CNEG’s traded subsidiary, China Erzhong Group (Deyang) Heavy Industries Co (二重集團德陽重型裝備), in May due to poor performance.

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