China Development Bank Calls Meeting as Bundled SME Bond Sours; maker of baby formula has stopped operations, its owner can’t be contacted and it’s no longer able to repay principal or interest

China Development Bank Calls Meeting as Bundled SME Bond Sours

China Development Bank Corp. will call a meeting of investors in a bundled bond that the bank underwrote to arrange for payment of interest and principal after one of the borrowers became insolvent.

Harbin Huijiabei Foods Co. was one of four companies that issued the 170 million-yuan ($27.7 million) three-year bond in 2010, the bank said in a statement today on the website of the National Association of Financial Market Institutional Investors. The maker of baby formula has stopped operations, its owner can’t be contacted and it’s no longer able to repay principal or interest, according to the statement.

China introduced bundled bonds in 2009 to help smaller companies raise funds by combining the debt of several enterprises into one security. The Shenzhen Small & Medium Enterprises Credit Financing Guarantee Group Co., the guarantor of the bundled bond, will make payments if Huijiabei can’t, according to the statement.

The investor meeting, scheduled for May 24 in the city of Harbin, comes as slowing economic growth spurs concerns that more companies may be unable to repay borrowing. Bad loans at Chinese banks increased for a sixth straight quarter in the first three months of this year, when economic growth slowed to 7.7 percent from 7.9 percent in the fourth quarter of last year.Huijiabei was also unable to make repayments due at the end of last year, which were instead made by the guarantor, according to China Development Bank’s statement.

The bank will ask for approval at the meeting to seek early repayment of the 12 million yuan share of the bundled bond that Huijiabei owes. If the company is unable to make that early repayment, the guarantor will need to pay, according to the statement.

To contact Bloomberg News staff for this story: Aipeng Soo in Beijing at asoo4@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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