Chinese Solar Component Manufacturer Facing Bond Default

A Chinese maker of solar components is threatening to become the nation’s next company to default on bonds, highlighting industry challenges as President Xi Jinping pushes to cut global-warming emissions.

Baoding Tianwei Yingli New Energy Resources Co., whose majority holder was until last year the world’s biggest panel company by shipments, said there’s uncertainty if it can repay 1.057 billion yuan ($166 million) of bond principal and interest due Oct. 13 after suffering losses. The firm, based in the northern province of Hebei, is still trying to raise money, according to a statement posted on the Chinamoney website Tuesday.

During President Xi’s visit to the U.S. last week, China said it will start a national pollution-trading system and announced changes to favor electricity produced by greener sources. He must balance those vows with steps to shore up economic growth at its weakest in more than two decades. Concerns are mounting that China National Erzhong Group Co. has become the second state firm to default on onshore debt after a Sept. 28 deadline for an interest payment passed without word whether it was made.

“It’s very likely Tianwei Yingli will default,” Zhang Li, a bond analyst at Guotai Junan Securities Co. in Beijing, said. “Many Chinese companies have such a problem this year as the economy slows.”

Debt Stress

Tianwei Yingli sold the bonds in question, which now carry a 5.7 percent coupon, in 2010 with a 1 billion yuan face value. The yield on those securities jumped 9 basis points on Sept. 29 to 12.4 percent, near a record high, according to data compiled by Chinabond.

Baoding Tianwei Yingli’s losses were 325 million yuan in 2014, compared with 448 million yuan in 2013 and 632 million yuan in 2012, it said.

Yingli Green Energy Holding Co., the panel maker that has fallen from its leading position, has a 74 percent stake in Baoding Tianwei Yingli. This year, Yingli Green Energy has lost two-thirds of its market value and in May acknowledged “substantial doubt” about whether it can stay afloat amid a pile of debt.

Baoding Tianwei Group Co., which became the first state-owned company to default when it reneged on payments in April, has an indirect stake in Baoding Tianwei Yingli and both are located in the town of Baoding. It has a 23 percent stake in Shanghai-listed Baoding Tianwei Baobian Electric Co., according to an Aug. 17 statement from the latter. Baoding Tianwei Baobian has a 26 percent stake in Baoding Tianwei Yingli, an April Baoding Tianwei Yingli statement shows.

©2015 Bloomberg News

Lead image: Bond indices. Credit: Shutterstock.

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