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
May 21, 2013 Leave a comment
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
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