China's Sinosteel extends bond redemption date amid liquidity concerns

OCT 19, 201512:44 PM

[SHANGHAI] China's state-owned Sinosteel said it had extended the date investors can start redeeming its bonds for a month until Nov. 16 amid reports the debt-laden steel giant had asked investors to hold off seeking repayment due to liquidity problems.

The extension would allow investors in the debt issued by subsidiary Sinosteel Corp Ltd to have more time to review the matter, the company said in a statement posted on the website of one of the country's main bond clearing houses late Friday.

In a separate letter seen by Reuters, Sinosteel had asked bondholders of its 2 billion yuan (US$315 million) October 2017 bonds not to exercise a put option on Oct 20, the earliest available date, because the company would not be able to make full payment. Some of the company's operations had been halted and it was facing a severe liquidity shortage, the letter said.

Local and international media reported the contents of the letter, but its authenticity could not be confirmed and Sinosteel did not answer calls requesting comment.

In the statement posted on the website, Sinosteel offered shares of its Shenzhen-listed subsidiary Sinosteel Engineering & Technology Co Ltd as additional collateral for the debt, as an inducement for bondholders to stay invested.

Sinosteel had a debt of over 100 billion yuan with debt-to-asset ratio up to 98 per cent between 2011 and 2013, according to a report dated in June 2014 issued by China Cheng Xin International Credit Rating (CCXI), a domestic rating agency.

China's steel sector has been grappling with a slowing economy, oversupply and a hefty debt burden, a legacy of over-investment during the country's infrastructure boom in the wake of the global financial crisis.

REUTERS