Troubled Chinese firm avoids bond default

Written by Reuters | Shanghai | Updated: Jul 24 2014, 07:46am hrs
A troubled Chinese construction company avoided a landmark bond default at the last minute on Wednesday, raising enough funds to pay off both principal and interest on a 400 million yuan ($64.51 million) bond, people directly involved in the matter told Reuters.

The people said there was aggressive fundraising by Huatong Road & Bridge Group Co Ltd, as well as collection of its accounts payable by a local government in Shanxi province, where the firm is based. The moves let Huatong steer away from what would have been the first public default in China's massive interbank bond market - where 94 percent of all Chinese bonds are issued.

No comment was immediately available from Huatong.

The people knowledgeable about the fundraising, who spoke on condition of anonymity, said that while the money deposited in an escrow account with Shanghai Clearing House would be sufficient to pay off the bondholders, the company might not make a formal announcement of the fact on Wednesday.

While Chinese bond issuers are obliged to publicly report defaults, they are not required to announce an on-time repayment, according to a Shanghai Clearing House official who declined to give her name. On July 16, Huatong warned investors it might not be able to repay interest and principal due on a one-year bond on Wednesday.

If Huatong defaulted, it would have been the first time a Chinese company defaulted on a bond principal

in China.