[Exclusive] DunAn Tackles Short-Term Solvency But Faces Rocky Road Ahead
Xu Wei
/SOURCE : Yicai
[Exclusive] DunAn Tackles Short-Term Solvency But Faces Rocky Road Ahead

(Yicai Global) May 28 -- Debt-laden conglomerate DunAn Holding Group has managed to pay off CNY900 million (USD141 million) worth of mid-term borrowing, but is still tangled in a web of liabilities as it the struggles to obtain further credit.

The Zhejiang-based group still has six short-term financing bills and mid-term notes worth a total CNY5.4 billion (USD849 million) maturing this year, bond investors told Yicai Global. The notes it just repaid were issued in 2013.

DunAn pledged CNY1 billion worth of shares in Anhui Jiangnan Chemical Industry to pay off the debt, the investors said. But it only has so much to pledge and all eyes are now on local governments and financial institutions to see if they offer further support. The company appealed for a bailout on May 4, when it had CNY45 billion in interest-bearing debt outstanding and had pledged all of its shares in China Creative Wind Energy just one day earlier.

A number of specialists in share pledging told Yicai Global that both deals were likely done over the counter at ratios of between 20 percent and 60 percent, compared with a market average of between 30 percent and 40 percent. Floor-traded pledges are generally carried out by securities firms that can force liquidation if there are problems with the underlying assets, they added.

Though DunAn has managed to quell its short-term debt woes, the market is still concerned about the firm's future. Credit agency United Ratings has already placed subsidiary Zhejiang DunAn Artificial Environment on a watch list of companies likely to be downgraded, it said in a report on May 23.

DunAn Artificial Environment is relatively solvent, but it is a guarantor for affiliated companies and could get stuck in the mud if those companies encounter issues, the report added. It also indicated that the firm is reliant on investment income and government subsidies and struggles with cost control.

Editor: James Boynton

Follow Yicai Global on
Keywords: National Bureau of Statistics of China , Industrial Enterprises , PROFIT , SOEs , Deleveraging , Supply-Side Reform