China Bans Steel Group Jinggong From Selling New Bonds in Crackdown on Dodgy Borrowers
Duan Siyu
DATE:  Nov 19 2020
/ SOURCE:  Yicai
China Bans Steel Group Jinggong From Selling New Bonds in Crackdown on Dodgy Borrowers China Bans Steel Group Jinggong From Selling New Bonds in Crackdown on Dodgy Borrowers

(Yicai Global) Nov. 19 -- Jinggong Group has been banned from issuing bonds for two years after China’s interbank bond market regulator found the steel-to-wine conglomerate guilty of buying its own debt through indirect channels to buoy subscriptions.

Shaoxing, Zhejiang province-based Jinggong illegally bought into two bonds it issued in 2018, disturbing the order of the market, the National Association of Financial Market Institutional Investors said yesterday.

Bond issuers are not allowed to buy their own bonds via their affiliates and underwriters and investors are not permitted to help the issuer to do so, the association added.

Such backhanded practices can lead to defaults amid market fluctuations and tight liquidity, said the NAFMII. The suspension is in order to reduce the risks that such violations bring to the company and the market, it added.

China's bond market has been hit by a slew of bad news recently. A spate of corporate debt defaults led to bond issues worth a combined CNY25.31 billion (USD3.86 billion) being cancelled or postponed between Nov. 9 and Nov. 16, the Securities Times reported yesterday.

Yongcheng Coal and Electricity Holding Group is likely to default on two ultra-short-term bonds worth CNY2 billion (USD305 million) that mature next week due to insufficient working capital, the central Henan province-based energy firm said on Nov. 17. It already defaulted on a CNY1 billion bond last week.

Brilliance Auto Group has defaulted on CNY6.5 billion (USD992.5 million) in loans so far and amassed CNY144 million (USD22 million) in unpaid interest, the Shenyang, northeastern Liaoning province-based carmaker said on Nov. 16.

As a result, the bonds of many other companies such as Tsinghua Holdings, Yunnan Metropolitan Construction Investment Group, Jizhong Energy Group, Suning.Com, and Tsinghua Unigroup have plunged.

The NAFMII launched a probe yesterday into brokerage Haitong Securities that may have been behind Yongcheng Coal’s illicit bond issuance.

Jinggong, which owns Jinggong Steel Building Group, Jinggong Technology and Kuaijishan Shaoxing Rice Wine, does not have a good credit history. In July last year it defaulted on four bonds worth CNY1 billion (USD152.4 million).

Editors: Tang Shihua, Kim Taylor

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Keywords:   Discipline Action,Debt Issurance,Deleverage,Industry Association,NAFMII