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SOE may miss payment on bond interest
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A unit of China’s biggest state-owned machinery company may be unable to make interest payment on a bond as slowing growth heightens default risks among heavily indebted firms.
China National Erzhong Group, which makes metal smelting equipment, may miss an interest payment on a 1 billion yuan (US$157 million) five-year bond issued in 2012, it said in a statement, without giving an amount.
Chinese authorities say they are trying to reform lumbering, inefficient industrial giants of the state sector, but the process is slow and blocked by vested interests.
CNEG is a subsidiary of China National Machinery Industry Corp, China’s biggest state-owned machinery company and one of around 110 major state-owned enterprises 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 that the interest payment was due on September 26.
China has already seen bond defaults this year as slowing growth in the world’s second-largest economy pressures companies.
China earlier this month revised downward its 2014 economic growth figure to 7.3 percent, the weakest in 24 years.
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