EnergyWatch

China Energy's Unkept Promise Jolts Dollar-Bond Investors

Asian credit investors tiptoeing around default risks in China learnt the hard way on May 25 that a pledge to repay a bond can be reversed within hours.

Photo: /ritzau/AP/Mark Schiefelbein

That’s what happened with China Energy Reserve & Chemicals Group Co. on that morning. The company said it planned to repay its overdue $350 million notes and a coupon on its 2019 bonds, sparking a rebound in its notes, only to say later that day it had insufficient funds in its trustee account to meet both the obligations. That sent the notes tumbling once again.

A couple of weeks earlier, the oil and gas producer saddled with about $2 billion of offshore notes outstanding, blamed its junior staffers for the default of its $350 million bond, saying they misread notices from Bank of Communications Trustee Ltd. about the required redemption and coupon payments, Debtwire reported. The company said in a statement that appeared on the Hong Kong exchange on May 27 the default was due to “tightening in credit conditions.”

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