Chinese iron producer defaults on bond payments - 7th mainland firm to do so this year

SHANGHAI (BLOOMBERG) - A Chinese pig iron producer said it missed a bond payment, becoming at least the seventh firm to renege on obligations in the local note market this year.

Sichuan Shengda Group Ltd. missed the full 21.75 million yuan (US$3.4 million) in interest due Dec. 5 on its 7.25 per cent 2018 notes, because of a cash shortage, according to a company statement on Chinamoney's website Monday. It also failed to repay the full 300 million yuan of principal on the bonds that holders opted to sell back early on the same day. The company, based in the southwestern province of Sichuan, did not give details on any payment amount.

More firms in China are struggling to repay debt amid the worst economic slowdown in a quarter century. China Shanshui Cement Group Ltd. last month became at least the sixth company in 2015 to default on yuan-denominated domestic notes. State- owned steel trader Sinosteel Co. postponed a bond payment for a second time in November.

Sichuan Shengda and its subsidiary had a total of 514.41 million yuan of overdue borrowings as of Nov. 25, according to a statement from Bank of Tianjin Co. on Nov. 26. Shengda's shareholders have provided a guarantee for the bond, said Pengyuan Credit Rating Co. in a statement on Nov. 27.

The company said it will continue to raise money to repay the debt through asset restructuring, the Monday statement said.

The company said Nov. 26 it was uncertain it could repay the securities if investors redeemed them. The effective due date is Monday because Dec. 5 was a Saturday, according to its prospectus.

Pengyuan downgraded the issuer's rating to B from BBB+ and cut the bond score to BBB from A.