Ronshine China Holdings failed to make coupon payments of $27.9mn on two of its dollar bonds with a combined principal outstanding of $726mn. The company missed the coupon payment of $12.8mn on its 8.1% bonds due June 2023 after the grace period ended on July 9. It also missed a $15.1mn payment on its 7.35% bonds due December 2023, with a 30-day grace period ending on July 15.  If the company continues to default on payments, then holders of at least 25% of the aggregate principal amount may require immediate payment of the principal and accrued interest, thus accelerating repayments. Chairman Ou Zonghong said, “In light of its current liquidity position, the group cannot guarantee that it will be able to perform repayment obligations of the interest on senior notes mentioned above and other senior notes when they fall due or within the relevant grace period.”

Subsequently, Ronshine was downgraded to Ca from Caa1 by Moody’s with a negative outlook due to weak recovery prospects for bondholders regarding the bonds above. The company has weak liquidity and limited financial flexibility. Moody’s notes that Ronshine would have to depend on asset sales or investments from potential investors for debt servicing. However, the execution of these fundraising activities are uncertain.

Ronshine’s dollar bonds were trading at distressed levels of 8-13 cents on the dollar.

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