SHANGHAI (Reuters) - A Beijing-based urban landscaping company saw its shares fall for a fourth day after poor demand for its bond issue, illustrating the difficulties some corporate issuers are facing as investors become increasingly choosy and as credit risks rise.
Shares in Beijing Orient Landscape & Environment Co Ltd 002310.SZ slid 2.5 percent on Tuesday, a day after weak demand for the company’s bonds saw it attract just 50 million yuan ($7.9 million) for an issue that was meant to raise as much as 1 billion yuan ($156.9 million).
The bond issue, rated AA+ by Shanghai Brilliance Credit Rating, had a coupon of 7 percent. The average yield on 3-year corporate debt rated AA+ AA+IFR3YS=CDC has risen nearly 48 basis points since April 19 amid a string of corporate debt defaults.
“The market’s requirements have changed so suddenly, and Orient Landscape wasn’t able to meet the market’s needs so quickly,” said Samuel Chien, managing director of Shanghai BoomTrend Investment Management.
He added that some other listed companies could face similar situations in the current market environment.
Orient Landscape said in a statement to the Shenzhen Stock Exchange on Monday that its cash conditions were good and that its operational situation was normal. The company made principal and interest payments worth 832.5 million yuan on 270-day commercial paper that matured Monday.
Eleven companies in China have defaulted on interest and principal payments on 18 bonds worth a combined 15.6 billion yuan since January, data compiled by Reuters showed. Twelve of those defaults have come since the beginning of March.
In another indication of rising pressures facing corporate issuers, 73 bond auctions worth 47.4 billion yuan were postponed or canceled in March, a jump of nearly 80 percent from a month earlier, according to data compiled by Reuters. An additional 81 bond issues worth 47 billion yuan were postponed or canceled in April.
CEFC Shanghai International Group Ltd, a subsidiary of China CEFC Energy, on Monday became the latest company to default on bond payments after it missed principal and interest payments totaling 2.09 billion yuan due on May 21.
CEFC Shanghai had a AAA long-term credit rating from domestic agency China Lianhe Credit Co until the end of April, when reports emerged that China CEFC Energy’s chairman, Ye Jianming, was under investigation for suspected economic crimes.
On Tuesday, China Lianhe said it had cut Shanghai CEFC’s long-term credit rating to C, the fifth time it had downgraded the company in less than three months.
“Deleveraging in the real economy is inevitably accompanied by the gradual exposure of risk,” said a trader at a domestic brokerage.
Editing by Jacqueline Wong