January 15, 2020 / 5:15 AM / 10 days ago

State-owned Chinese aluminium maker's bonds plunge after S&P downgrade

SHANGHAI, Jan 15 (Reuters) - U.S. dollar bonds issued by a state-owned aluminium producer from China’s western province of Qinghai plunged on Wednesday after S&P Global Ratings downgraded the company on Tuesday following a missed semi-annual coupon payment.

A $300 million July 2021 bond issued by Qinghai Provincial Investment Group (QPIG) was quoted at 40 cents on the dollar on Wednesday, according to Refinitiv data, down 8 cents from the previous day and the lowest value since it was issued in July 2017.

QPIG missed a coupon payment on the bond on Jan. 10.

A $300 million bond maturing next month dropped 6 cents from a day earlier to 50 cents on the dollar, its lowest ever, while a $250 million March 2021 bond was quoted at 46 cents, unchanged from Tuesday but down 2.12 cents since Jan. 10, according to Refinitiv.

S&P lowered its rating on QPIG to “D” from “CCC-“ on Tuesday, and said that it believed the company is unlikely to make a full payment within an imputed five-business-day grace period.

It noted that a missed coupon payment on the July 2021 bond would trigger cross-defaults on the other dollar bonds, giving bondholders the right to demand immediate principal and interest payments.

“In our view, QPIG does not have the financial capacity to make timely and full payment on its debt obligations. We also do not expect the Qinghai provincial government to provide timely support to help QPIG meet its obligations,” S&P said.

QPIG’s missed payment follows a high-profile offshore default by state-backed Tianjin-based commodities trader Tewoo Group, which in November became the first major state-owned enterprise to miss an offshore bond payment in two decades.

S&P previously warned that offshore default risks by Chinese issuers are likely to grow as more than $200 billion of offshore debt is set to mature in 2020 and 2021.

QPIG could not be immediately reached for a comment.

Reporting by Andrew Galbraith; Editing by Christian Schmollinger

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