Sat, Feb 15, 2020 - Page 10 News List

Woes deepen for China tech champion

LOOMING DEBT PAYMENTS:Tsinghua Unigroup’s borrowing spree raised its debt-to-asset ratio to 74 percent last year, and it hopes to negotiate US$900 million in financing

Bloomberg

A top Chinese technology company that has struggled for months to assure creditors of its financial stability has seen its efforts to secure a fresh loan disrupted by an outbreak of COVID-19 in China.

With payments on a US dollar loan coming due next month, Tsinghua Unigroup Co (清華紫光) has been engaged with lenders on a US$900 million financing deal. That loan has been delayed partly due to the coronavirus outbreak and the Lunar New Year holiday, a company spokesman said on Tuesday.

Even so, the financing market has been open for others. Developers have been selling US dollar bonds, despite property sales having come to a halt due to the shutdown of large parts of China’s economy as a result of the outbreak.

Yuzhou Properties Co on Thursday amassed more than US$3.5 billion in orders for a US$400 million note.

Unigroup, which has been at the forefront of Beijing’s campaign to achieve global dominance in technology, saw some of its US dollar bonds tumble to two-month lows this week after news of the delay on its loan deal.

It all makes for a challenging start to the year after the chipmaker’s rocky time last year. Unigroup’s 2023 dollar bond tumbled in November last year on news of plans to extend and amend its loans.

The note hit a low of about US$0.60 on the US dollar in December last year; Unigroup that month secured a jumbo credit line, raising questions about the company’s cash requirements.

The firm needs to tackle a US$1.3 billion offshore debt burden this year, and proceeds from the loan were intended for refinancing.

Unigroup also faces as much as 8.3 billion yuan (US$1.19 billion) in domestic bond redemptions next month.

Founded in 1988, Unigroup is a business arm of Tsinghua University, which is regarded as one of the nation’s top institutions of higher learning and counts Chinese President Xi Jinping (習近平) as an alumnus.

The company suffered a net loss of 3.2 billion yuan for the first half of last year. It had 165.6 billion yuan in interest-bearing liabilities as of the end of June last year, according to its half-year financial report.

The group and its subsidiaries also have a combined 54.6 billion yuan of onshore and offshore bonds outstanding, data compiled by Bloomberg showed.

The company’s finances have deteriorated sharply in the past four years after it embarked on a borrowing spree to up-size its global footprint through acquisitions and investments.

Its debt-to-asset ratio climbed to about 74 percent by the middle of last year, compared with just more than 59 percent in 2016.

The company has also prepared a backup plan and has sufficient cash on its books” if the US$900 million loan is not completed in time, a Unigroup spokesman said, adding that the firm remains in discussion with lenders.

A spokeswoman in December last year said that the firm was confident of meeting all bond-payment obligations.

Investors are trying to determine which borrowers are on their own when it comes to dealing with their financial problems, and which would receive official help.

Surprises came last year when some state-owned lenders were allowed to default on their debt.

The extent to which official support is forthcoming — if it should prove needed — in Unigroup’s case would give creditors further clues on this question.

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