Anhui Shengyun Environment-Protection Group, a Chinese company engaged in solid waste treatment businesses, has failed to pay RMB215 million (US$31 million) bond principal and interests for its maturing bond due on October 9.
“The company is experiencing difficulties in production and business operations,” said Anhui Shengyun in a statement released on October 9. “It suffers from an extreme liquidity squeeze due to the impact of various adverse factors, including frozen bank accounts, a multiple-stage downgrade, and numerous unpaid liabilities.”
The unpaid bill is a RMB200 million (US$28 million) super & short-term commercial papers with a 270-day term with an interest rate of 7.5%. The bond was issued in the inter-bank bond market by Anhui Shengyun in early 2018.
The company said that it will “actively negotiate with all related groups” to explore options like loans extension or equity injections, while reducing the company’s financial stress via cutting expenses, selling assets and seeking government support.
Anhui Shengyun, which was listed in the Shenzhen Stock Exchange in 2010, has been trapped in a severe debt crisis in recent months.
According to statistics collected by Chinese state-owned news portal Securities Times, Anhui Shengyun issued at least 12 litigation and arbitration announcements related to overdue bonds from April 2 to August 10, with total outstanding debt amounting to RMB1.68 billion (US$242.83 million).
The company recorded net losses of RMB95 million (US$13.73 million) in the first half of 2018. The financial losses partly led to at least 33 bank accounts of the company being shut down by banks as of early August 7, said Securities Times.
China’s waste incineration process is usually conducted in a build-operate-transfer (BOT) model. It enables waste treatment companies to raise money to design, build and operate a project, before handing over the project to the government. It allows projects to recover their investment and expenses, as well as earning a return on investment.
The BOT mode, however, leads to some companies like Anhui Shengyun to expand their businesses too rapidly by borrowing large amounts of money. The company’s short-term loans more than doubled in the past three years, jumping from RMB768 million (US$111 million) in early 2015 to RMB1.55 billion (US$224 million) in late 2017.
During the same period of time, its long-term loans and payable bonds also tripled, increasing from a total of RMB903 million (US$130 million) to RMB2.24 billion (US$324 million).
Founded in 1995, Anhui Shengyun currently owns 79 subsidiary companies with a total of over 4,500 staff. The company had total assets of RMB15.79 billion (US$2.28 billion), according to its website.
The company is mainly engaged in the investment, construction and operation of waste incineration for power generation projects. It also conducts research and development, manufacture and sales of conveying machinery, incinerators and eco-friendly products like household waste incineration power equipment and sludge drying incinerators over the globe.