Commodity giant Tewoo Group reportedly could become one of China's all-time high profiled state-owned enterprises to default on a U.S. dollar bond.
«Tewoo Group is very likely to default on its US$300 million US dollar bond due December 16,» said a «Bloomberg» report citing unnamed buy-side sources linked to the firm’s offshore debt manager.
Tianjin-based Tewoo has businesses in infrastructure, logistics, mining, autos and ports, its website said, with presence in the U.S., Germany, Japan and Singapore. In 2017, the unlisted firm reportedly generated annual revenue of $66.6 billion and housed more than 17,000 employees.
Terms
According to the report, bondholders have just over two weeks to either take 64 percent in losses or accept delayed and significantly reduced coupon payments. The proposal was made after Tewoo said last week that it would be unable to repay interest on a $500 million bond which led ICBC to transfer $7.9 million to bondholders on its behalf and pledged to repay the remainder of the note if the borrower couldn’t.
In addition to another $1.6 billion worth of bonds lacking such protection, Tewoo subsidiaries have also struggled to make local debt payments including a missed coupon for a 1.2 billion yuan note in July and another note in June.
China is undergoing the worst economic slowdown in three decades and such events signal greater willingness by top authorities to allow state-owned enterprises to default – a stark contrast to past assumptions of implicit guarantees. The government is already undergoing additional measures that could ease market stress including a planned $6 billion U.S. dollar fundraising and multiple cuts to key interest rates.
