Winsway (1733 HK) Missed Bond Payment Heightens Chinese Default Risk

Winsway Missed Bond Payment Heightens Chinese Default Risk

byDavid Yong

April 9, 2015

Investors in coal-related companies face heightened default risks after one that relies on markets in China and Mongolia became the latest Chinese corporate to miss an interest obligation.

Winsway Enterprises Holdings Ltd., an importer of coal for steelmakers, didn’t make a $13.15 million semi-annual coupon payment due Wednesday on $309.3 million of notes maturing in April 2016, according to a stock exchange filing. It plans to use a 30-day grace period to discuss restructuring the debt after hiring Akin Gump Strauss Hauer & Feld LLP as a legal adviser to an expected group of bondholders.“The only solution for them is to sell assets, restructure their debt and call for a capital injection to keep the operations going,” Jian Cheng, an analyst at Standard & Poor’s in Hong Kong, said by phone. “I don’t see any material recovery in the coal industry this year.”

The coal industry’s latest cash squeeze is another indication the market remains far from rebounding as demand dwindles amid China’s economic slowdown and the government boosts efforts to curb pollution. Kaisa Group Holdings Ltd., which missed coupon payments on two dollar bonds last month, and Renhe Commercial Holdings Co. are two Chinese builders that defaulted this year, S&P said in a research note on March 27.

Cheng said S&P will need more details from Winsway on the missed payment and restructuring before revising the bond’s CCC-rating, which is three steps from default.

Bumi, Berau

Coking-coal prices have dropped 2.3 percent this year, after tumbling 65 percent in the past four. Indonesian coal producers PT Bumi Resources and PT Berau Coal Energy are also restructuring $2.325 billion of their outstanding bonds post the price slump. SouthGobi Resources Ltd., a Mongolian coal miner part-owned by Rio Tinto Plc and Temasek Holdings Pte, has also sought more funding to stay afloat.

Mark Fucci, a lawyer at Akin Gump Strauss Hauer in Hong Kong, didn’t answer two phone calls or immediately reply to an e-mail seeking comment.

Winsway’s 8.5 percent $309.3 million of 2016 bonds fell 1.25 cents to 29.75 cents on the dollar as of 5:35 p.m. in Hong Kong, according to prices compiled by Bloomberg. They’ve declined 8.2 cents so far this year after a 17.2-cent slide in 2014. The company said March 27 it was seeking to restructure the notes and hired UBS Group AG and AlixPartners LLP to negotiate with bondholders.

Winsway sold $500 million of the notes in 2011 at par, according to Bloomberg data. The outstanding amount was reduced through buybacks, including a 2013 tender offer.

In a separate filing Thursday, Winsway said its proposal to sell its 42.7 percent holding in Grand Cache Coal Corp. has been approved by the Canadian government. Japan’s Marubeni Corp. sold its 40 percent of the miner last September for a nominal $1.

Excluding the Grand Cache assets, Winsway said losses from continuing operations widened to HK$0.319 per share last year from HK$0.19 in 2013.

China’s economy is forecast to grow at 7 percent this year and 6.7 percent in 2016, according to median forecasts in Bloomberg surveys. Asia’s biggest economy grew last year at the slowest since 1990, official data showed.


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