Dongbei Special Steel, a steelmaker is owned by Liaoning provincial government.
The default date was yesterday, Monday 28. The total amount owed in corporate debt is 852 million yuan (HK$1 billion).
A bigger default is expected from Dongbei Special Steel Group, as corporate leverage ratios rise sharply and Chinese industry battles persistent slowing growth.
The company has failed to repay creditors 852 million yuan in one-year notes and interest on Monday in a rare default by a local government-owned company in the interbank bond market.
The failure was the eighth credit default in China’s debt market this year, reflecting growing dangers in China’s corporate debt sector amid excess capacity and a broad economic slowdown.
In March alone, sausage maker Nanjing Yurun Foods, and iron ore company Zibo Hongda Mining defaulted on their notes.
The confirmed default and the warning of another imminent one by Dongbei Special Steel came just four days after chairman Yang Hua reportedly committed suicide by hanging himself at home.
China Development Bank, the chief underwriter of the defaulted notes, said in a statement on the Shanghai Clearing House that Yang’s death had disrupted debt repayment plans.
Instead of using its own funds to cover the debt, the bank said it had held “many meetings with the Liaoning government and Dalian government” to work out a debt repayment plan. CDB would continue to press the debt issuer to raise funds, it added.
Products from the steel company were used in China’s spaceships, Chinese-developed planes and high-speed railways, according to the company’s website.