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China's Tsinghua Unigroup defaults on $198 million bond: sources

Daniel Nenni

Admin
Staff member
Please remember this when you read that China is catching up in the race to semiconductor supremacy becuase its not gonna happen.


SHANGHAI (Reuters) - Tsinghua Unigroup, a major government-backed player in China’s technology race, has defaulted on a 1.3-billion-yuan ($197.96 million) bond, three sources said, as several high-profile delinquencies by state firms rattled the country’s bond market.

The default by Tsinghua Unigroup, a wholly-owned division of the prestigious Tsinghua University in Beijing, on Monday immediately triggered a credit rating downgrade that is expected to weaken the company’s financial health.

The semiconductor conglomerate has been a major driving force in Beijing’s campaign to boost its chip industry amid an ongoing spat over trade and technology with Washington, which has drawn attention to China’s reliance on key imported components.

Tsinghua Unigroup defaulted after its proposal to extend a repayment deadline failed to gain support from bondholders, sources said.

Tsinghua Unigroup’s credit rating was slashed to BBB from AA on Monday by China Chengxin International Credit Rating Co. The rating agency said the event could trigger cross-defaults, potentially strangling its funding and squeezing its liquidity.

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The company could not be immediately reached for comment.

Tsinghua Unigroup’s default follows other state borrowers, including coal miner Yongcheng Coal & Electricity Holding Group and automaker Huachen Automotive Group, which have failed to service debts on time, triggering a sell-off in some corners of the corporate bond market.

Even before the default, Tsinghua Unigroup’s bond prices had already plunged after the company said it would not exercise its option to redeem a perpetual bond.

On Tuesday, the price on a corporate bond issued by Unigroup’s parent, Tsinghua Holdings, tumbled more than 14%, making it the worst performing bond on the Shanghai Stock Exchange.

 

Fred Chen

Moderator
Would be of interest to know why they defaulted. Is it due to poor product strategy, low prices ?
There may be a high expectation from bondholders for YMTC to bring in revenue and returns on heavy capital investment. But this requires selling the 3D NAND competitively against Kioxia and Samsung for example. Maybe it's achievable within China only.
 

tonyget

New member
Judging a sector of a country by some sporadic cases is very funny. Do you know many companies in the US went bankruptcy every year?Does that mean the entire sector is done because of these bankruptcy ?

No tech company ever go down in the US/Europe/Japan ? I don't think so.
 

herbs88

New member
No tech company ever go down in the US/Europe/Japan ? I don't think so.
tonyget
the major difference is that China has been running state capitalism. The country has controlled Tsinghua holdings, the parent company of Unigroup through the National Tsinghua University. The fact that they let the bond go default on one of the largest companies in their “strategic industries” says a lot about China’s current status.
 
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