Pressure is mounting for China’s dollar bond defaulters to present disgruntled creditors concrete restructuring plans, as another firm that has failed to do so now faces court-ordered liquidation.
Dangdai International Investments Ltd., a debt issuance vehicle of Wuhan Dangdai Science & Technology Industries (Group) Co., received an order to dissolve from a Hong Kong court after being denied a requested three-month adjournment of the case at a Monday hearing. A Dangdai representative said during the hearing that it had been working on a plan to resolve its debt issues.
The court’s decision to issue the so-called winding-up order came just two weeks after a Chinese property developer received an identical blow after losing its own legal battle. While repayment failures in China’s offshore market have surged amid an unprecedented housing crisis, the vast majority of defaulters have been slow to respond to creditors’ demands for a restructuring roadmap, raising the risk of court-imposed liquidation and weakening long-term investor confidence in China Inc.
“The so-called proposal is dependent on the successful implementation of the restructuring in relation to the onshore debt owed by the parent company,” with the latter estimated to be completed by the end of this year, said Linda Chan, the Hong Kong court judge, during the hearing. “There is no utility in granting an adjournment.”
Dangdai International, which hired advisors to help with a debt workout in June, is working on a scheme of arrangement, according to its legal representative. Its parent Wuhan Dangdai has operations spanning from healthcare, property to tourism.
However, the company has so far only proposed to issue new bonds, without giving maturity dates or coupon rates, a representative for the petitioner said. “There is uncertainty after uncertainty” over the firm’s effort to form a debt plan, the representative added.
The Bank of New York Mellon Corp.’s London branch filed a winding-up petition against Dangdai International in Hong Kong in February, according to a stock exchange filing. The case was related to Dangdai’s 9.25% dollar bond originally due November 2022.
The broader Dangdai group of companies has defaulted on a combined $1.1 billion of dollar and yuan bonds, according to data compiled by Bloomberg.