September 27, 2018 / 2:37 AM / 3 months ago

China gold retailer Gansu Gangtai defaults on bond payments

SHANGHAI, Sept 27 (Reuters) - Gansu Gangtai Holding Group Co Ltd, a retailer of gold, gold artwork and gold jewellery has defaulted on bond payments after investors exercised options to sell bonds back to the company, the bond’s trustee said.

Gangtai’s 500 million yuan ($72.69 million) 6.8 percent 2019 bond featured a put option that allowed investors to sell the bonds back to the company on Sept. 26. Investors exercised the option on all outstanding bonds.

In a statement posted to the website of the Shanghai Stock Exchange late Wednesday, trustee Guosen Securities said that as of 4 p.m. on Sept. 26 (0800 GMT), Gangtai had not transferred principal and interest to a clearing house account.

“It is known that the issuer is facing a serious situation of insufficient liquidity, and until the present time it has yet to achieve effective improvement,” the statement said.

Guosen said that the exchange-traded bond faced the risk of suspended trade due to the company’s inability to complete payments in time.

The yield on a second bond issue, Gangtai’s 5.57 percent 2019 puttable bond has soared in recent weeks, touching 18.442 percent on Thursday and raising the likelihood that investors will choose to sell bonds back to Gangtai on the put option exercise date, Nov. 3.

As of Wednesday, Chinese companies had defaulted on 48 bonds worth a combined 56.7 billion yuan. While Chinese regulators have said the default rate remains much lower than in many other countries, the rise in bond defaults has highlighted risks to China’s economy as growth slows and amid an intensifying trade war with the United States. ($1 = 6.8785 Chinese yuan) (Reporting by Andrew Galbraith; Editing by Sam Holmes)

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