SHANGHAI: Huachen Automotive Group Holding Co Ltd, the state-backed parent of BMW‘s main Chinese joint-venture partner, has defaulted on a bond payment, two sources with knowledge of the situation said, highlighting the automaker’s ongoing debt woes.
Huachen was unable to a repay a 5.3% 1 billion yuan ($149.6 million) private placement corporate bond that matured on Friday, the sources said.
Because Huachen is backed by the Liaoning provincial government, the market continues to expect it to meet its obligations, but debt pressures on the company remain high, making debt servicing difficult, they said.
“Everyone hopes that (Liaoning) province will manage it, but we haven’t seen willingness or resources to support within the province,” one of the sources said.
Huachen did not immediately respond to Reuters’ request for comment.
In a statement on the Shanghai Stock Exchange website dated Monday, Huachen said the company was “continuing to work hard to raise money” and was in discussions with investors, but did not say it had defaulted.
Huachen said on Saturday that trading of the company’s exchange traded bonds was suspended from Friday, pending the resolution of “relevant circumstances.”
The default comes a month after Reuters reported that Chinese state-backed investors led by the state-controlled Liaoning Provincial Transportation Investment Group are considering taking BMW’s joint-venture partner Brilliance China Automotive Holdings Ltd private.
Rating agency Dagong Global Credit Rating Co Ltd downgraded its rating on the Huachen bond to A+ from AA last week, following a downgrade from AAA on Sept. 28.