China steel firm defaults on $179m debt days after chairman found hanged

SHANGHAI (AFP) - A Chinese steel company has defaulted on an 852 million yuan (S$179.3 million) bond payment, days after its chairman was found dead in an apparent suicide.

Dongbei Special Steel Group Co. said late Monday (March 28) it was unable to pay the interest or principal due on a one-year bond, while another 1.01 billion yuan on a shorter-term bill due next week was also "uncertain".

The company said last week that its chairman and Communist Party chief Yang Hua had been found hanged at his residence in a case now under investigation. The company statement has since been removed from its website.

As China's growth slows to its weakest level in 25 years, the country has been hit by a series of corporate defaults. The steel sector, already burdened by overcapacity, has been especially hurt as demand slows.

State-owned Dongbei Special Steel, headquartered in the northeastern city of Dalian, makes different types of steel including products for the automotive industry.

China makes more steel than the rest of the world combined, and the government plans cuts of up to 150 million tonnes in production capacity over five years.

One of China's largest steelmakers, state-owned Wuhan Iron and Steel, plans to shed up to 50,000 jobs, as the government struggles to reduce overcapacity while growth in the world's second-largest economy slows.

In April last year power equipment maker Baoding Tianwei Group Co failed to make a coupon payment of 85.5 million yuan, in what was said to be the first bond default by a state-owned firm.

Also last year privately-owned technology firm Cloud Live Tech Group was unable to pay both principal and interest on a five-year, 480 million yuan bond issue sold in 2012.