September 28, 2018 / 7:54 AM / a year ago

China's Gansu Gangtai defaults on bond payments for second time in a week

SHANGHAI, Sept 28 (Reuters) - Gansu Gangtai Holding Group Co Ltd, a retailer of gold, gold artwork and gold jewellery, said it missed a deadline for interest payments in the company’s second default on bond payments this week.

In a statement dated Sept. 27 but posted on the website of the Shanghai Stock Exchange Friday, Gangtai said it was unable to pay interest and fees totalling 39 million yuan ($5.67 million) for its 500 million yuan 7.8 percent 2022 bond.

The payments were due Sept. 26.

“Under the influence of financial deleveraging our company has exhibited a situation of insufficient liquidity since June of this year, and has yet to achieve effective improvement,” Gangtai said in its statement.

Earlier this week, Gangtai defaulted on bond payments on a puttable bond after investors exercised options to sell bonds back to the company, the bond’s trustee said.

The company also said late Thursday that it was being questioned by the Shanghai Stock Exchange over reports of its involvement in a false invoices case.

In a separate statement, Dagong Global Credit Rating Co Ltd said it had downgraded Gangtai’s issuer credit rating from B to C, and downgraded ratings on several of the company’s bonds. It had previously downgraded Gangtai to B from AA on Sept. 21.

Dagong defines an AA issuer rating as representing a “very low risk of default.”

Chinese regulators took the rare step of barring Dagong from taking on new securities rating business for a year after finding the company had provided pricey consultation services to firms it also issued credit ratings for.

China’s credit ratings industry has a reputation for providing favourable ratings for local issuers, downplaying risks, even as some international watchdogs warn debt is at levels that could trigger a financial crisis.

As of Thursday, 25 Chinese issuers had defaulted on 51 bonds worth a combined 60.1 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 = 6.8831 Chinese yuan) (Reporting by Andrew Galbraith; Editing by Simon Cameron-Moore)

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