Chinese energy company Hilong Holding defaults on dollar bonds

24 Jun, 2020 10:10
source: Singularity Financial

Singularity Financial Hong Kong June 23, 2020 – Hilong Holding Ltd., an oil equipment and services company, became the latest to default on Monday when it failed to repay a $165 million dollar bond. The company had sought to swap the debt with new debt, but failed to get sufficient investor support.

Since May, Hilong has been pushing holders of the $165 million in bonds that came due Monday to swap them for new higher-coupon debt due in 2022, plus a partial payment in cash.

That payment failure brings the value of defaults in China’s offshore market to $4 billion this year, up 150% from a year earlier, according to data compiled by Bloomberg. China’s dollar bond market has seen a record 11 defaults and distressed exchanges so far this year, up from nine last year, said Owen Gallimore, head of credit strategy at Australia & New Zealand Banking Group Ltd. “There’s been a broad sector hit across private firms in particular.”

Defaults onshore have slowed this year as the government seeks to avoid aggravating the economic slowdown. Defaults in China’s dollar bond market are accelerating amid the economic fallout from the coronavirus.

Hilong said investors representing about 63.45% of the principal amount of the bond which comes due Monday accepted the exchange offer, according to a filing to the Hong Kong Stock Exchange. That’s short of the required minimum acceptance rate of 80%.

Hilong is the latest borrower from Asia’s struggling oil sector to show signs of stress, after Hong Kong-listed oil explorer MIE Holdings Corp. defaulted on a dollar note in early May and an oil refiner from the eastern Shandong province missed a principal installment of a $1 billion loan earlier this month.

Both Moody’s Investors Service and Fitch Ratings have recently downgraded Hilong following an earlier deadline extension, citing concerns over the firm’s heightened refinancing risk.