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Coke, PepsiCo supplier Zhongfu to default on bond
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ZHUHAI Zhongfu Enterprise Co, Coca-Cola Co and PepsiCo Inc's bottle supplier, said yesterday that it won't be able to fully repay a bond due May 28, the latest example of a Chinese company to default in the onshore note market this year amid a cooling economy.
Zhuhai Zhongfu said it can only repay 148 million yuan (US$23.9 million) out of 590 million yuan and try to raise funds for the bond payment until the last moment, according to a statement issued to the Shenzhen Stock Exchange Monday. The company plans to pay all the 31.2 million yuan of interest.
The default came after Shanghai Chaori Solar Energy Science & Technology Co's failure to repay its onshore bonds last year, and Kaisa Group Holdings becoming the first Chinese developer to default on its U.S. currency debt in April.
The manufacturer, which is based in the southern city of Zhuhai and has nearly 4,000 employees, posted a loss of 41.7 million yuan in the first quarter, compared with a 67.1 million yuan in profit in the same period last year, mainly due to slumped orders from Coca-Cola and PepsiCo's increasing focus on cost-cutting strategies, its May 15 statement said.
The manufacturer also has 590 million yuan of 6.6 percent bonds due 2017. Holders of those securities will meet on May 29 to discuss unspecified proposals following a rating downgrade and change of the company’s biggest shareholder, according to a statement posted on the China Foreign Exchange Trade System’s Chinamoney website.
Despite the concerns about its ability to meet obligations, the company’s shares in Shenzhen soared 126 percent through April 29 this year amid a rally in Chinese equities. Its stock has been suspended from trade since that day.
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