Private chemical producer fails to repay bonds on time but avoids default label

Chinese chemical producer Hongda Xingye Groupfailed to repay RMB 950 million ($145 million) of bonds that were due on Monday but found a way to controversially avoid labeling it a default, reported Caixin.

A day before the debt matured, Guangzhou-based Hongda Xingye held an urgent meeting with 12 institutional holders of the 270-day ultrashort-term bonds. More than 90% of the holders voted to cancel registration of the bonds and accept repayment sometime later under separate agreements, according to a Hongda Xingye executive.

Consequently, the company technically avoided a default, the executive said. The official said the company will apply to the Shanghai Clearing House to cancel the bonds as soon as possible but didn’t divulge when bondholders will be paid, reported Caixin.

Amid China’s new wave of bond defaults, the maneuver stirred controversy. Some bond industry participants maintained that failure to repay on the due date was a default. The status of the Hongda Xingye debt was shown as defaulted on Wind, a financial information database. But a senior bond market participant said off-market repayment or conversion of bonds into general debt is not a default.