Hanergy has warned bondholders that it will miss payment on a bond issued by its hydropower subsidiary, a first indicator of pain for mainland lenders after its Hong Kong stock was suspended 10 months ago.
The rise and abrupt fall of Hanergy’s stock has become a symbol for the excess in China’s stock market, which began its slide shortly after. The slide has exposed corporations and executives who borrowed against rising shares.
Hanergy, which manufactures thin solar film, used its rising stock as well as its physical assets as collateral for heavy borrowing. Public documents show that the company borrowed against shares in its Jinanqiao dam in Yunnan Province — China’s largest privately owned dam — as well as against the rights to revenues from those shares.
Hanergy issued the Rmb1bn PPN001 instrument in 2014 at interest rates of 7.8 per cent through the Pudong Development Bank, one of China’s midsized lenders. Caijing magazine on Friday reported that holders of the instrument had received a notice saying that payment would not be made on time.
Two other notes totalling Rmb1.4bn are due next year. Hanergy founder Li Hejun often referred to Jinanqiao as his cash cow that allowed the company to take a bet on thin film solar power.
The company confirmed the report, but said it would issue a clarification later.
Meanwhile, trading in shares of China Yurun Food Group, a sausage maker, was suspended on Friday pending a statement on the potential impact from the default on domestic short-term financing notes issued by its subsidiary Nanjing Yurun Food.
The Hong Kong-listed company gave no further details in a filing to the Hong Kong bourse announcing the suspension.
Nanjing Yurun on Thursday defaulted on a Rmb500m short-term financing note repayment, the company said.
Additional reporting by Ma Nan and Reuters
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