After Yongcheng Coal Power unexpectedly defaulted in the domestic bond market in November last year, the scale of domestic coal issuers’ debt issuance began to fall into a sharp freeze.
With the advent of the global commodity bull market, coal prices are running at a high level and coal companies’ earnings are expected to improve, but the default of Yongcheng Coal and Power has set off a butterfly effect that has put state-owned enterprises as the dominant issuers in the coal industry under renewed scrutiny by bond investors, and the prospect of refinancing coal companies this year remains cautious under the pressure of huge maturing debts.
James Liu, assistant general manager of the fixed income department of ZF, said, “Although the current profitability of coal enterprises is still good, the profits obtained from coal sales are still far from each other compared to the huge maturing debt.” Refinancing difficulties may continue until mid-2021 and will be influenced by factors such as whether the pressure to pay off the bonds of “net-worthy” coal companies eases, the statements and substantive actions of relevant governments and departments, and whether credit debt defaults are reduced.
In the face of the cold demand in the primary market, Shanxi Coal Group told investors in a conference call last week that, given the current situation of coal companies issuing bonds is not very optimistic, if the bonds maturing during the year can not be renewed in a satisfactory interest rate range, will choose to pay off the debt. The volatility of coal bonds in the secondary market is also not small, to Jizhong Energy Group, for example, since November last year, the primary market public bond financing has been suspended, although the State-owned Assets Supervision and Administration Commission of Hebei Province recently held a meeting between Jizhong Energy Group and banks, hoping to seek greater support from banks, but the company’s “18 Jizhong Energy MTN003″ due at the end of October 2021 ” fell to 50 yuan last week, hitting a near 2-month low.
In addition, the Chinese Communist Party also plans to achieve “carbon neutrality” by 2060. A Goldman Sachs report on Feb. 26 mentioned that if coal demand declines rapidly, many coal and coal power companies may face insolvency, and the default rate of their loans and bonds will rise. exceed 20%.
Liu Junjie said that the inherent expectations of investors’ willingness to support the government has been shaken, while many coal companies still have their own blood-making capacity, heavy debt burden and unreasonable debt structure since the supply-side reform, “At this stage, for participation in the primary bidding of coal bonds will be very cautious.”
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