Business | Sausage maker defaults after dodging nonpayment in October

This time, the Chinese sausage maker that dodged default last year has run out of luck.
Nanjing Yurun Foods Co. said it failed to make full payment for 500 million yuan (USD77.1 million) bonds due yesterday, according to a statement on the Chinamoney website. The company, based in the eastern province of Jiangsu, avoided nonpayment in a turnaround in October.
Chinese companies are struggling with debt repayment as Premier Li Keqiang aims to weed out zombie companies amid the worst economic slowdown in a quarter century. Zibo Hongda Mining Co., an iron ore miner based in the eastern province of Shandong, said this month it didn’t raise enough funds to make its full debt payment due March 8. At least 11 companies have now reneged on bond obligations in the past two years even as the government loosened monetary policy.
Nanjing Yurun, a unit of Hong Kong-listed China Yurun Food Group Ltd., sold the 500 million yuan of bonds in 2015 with a coupon rate of 6.45 percent. It must repay 532.25 million yuan in principal and interest, according to a statement on March 9 posted on the Chinamoney website.
Nanjing Yurun is suffering from a cash shortage and sluggish demand for meat products, the company said in the statement yesterday. The company had a loss of 524 million yuan in the first nine months of last year, according to the statement. A call to the firm went unanswered. A call to Han Wei, the contact person listed on the company’s March 9 statement, went unanswered. There was no immediate reply from China Yurun after an operator took questions by phone and said someone may reply.
Nanjing Yurun said March 9 it wasn’t sure it could repay the notes because its director Zhu Yicai was placed under house arrest, which indirectly has had an impact on its operations.
Shanghai Brilliance Credit Rating & Investors Service Co. on March 15 cut the rating for Nanjing Yurun to CCC from BB and placed it on negative watch list, citing liquidity risks and debt repayment pressure, according to a statement on Chinamoney. Bloomberg