China firm in landmark bond default to sell assets

The first company in China to default on a corporate bond said today it would sell assets in a bid to meet interest payments as possible bankruptcy looms.
Shanghai-based Chaori Solar Energy Science & Technology Co on Friday confirmed the landmark default on interest payments of 89.8 million yuan (USD 14.7 million) for a five-year bond issued in 2012.
Analysts say China's first ever onshore corporate bond default could benefit the market in the long term by raising awareness of risk and making investors more selective.
The bond's lead underwriter and trustee China Securities had asked Chaori to provide immovable assets, equipment and accounts receivable to be sold or auctioned, the solar cell maker said in a filing to the Shenzhen Stock Exchange, where the bonds and its shares are listed.

Chaori might undergo restructuring or bankruptcy proceedings if it fails to repay debts, the company said in a separate statement to the exchange.
"The trustee is proposing... To take part in possible legal proceedings including reorganisation, reconciliation, restructuring or bankruptcy," it said.

On January 7, before the formal default, investors asked the higher court of Guangdong province to order payment from the company, its listing exchange and lead underwriter, but the case was still pending, their lawyer said last week.
One investor said today he did not have confidence in China Securities handling the issue, saying the firm had originally assured investors of Chaori's ability to pay.

"China Securities is the one that deceived us, it can't be trusted," investor Wang Yong told AFP. "We demand that China Securities repay us first and it can take the collateral from Chaori."
The trustee will hold a meeting of bond holders on March 26.