(Yicai Global) Aug. 31 -- Wuyang Construction Group Co. appears to have faked a reorganization deal to mislead investors two weeks after it defaulted on bonds worth USD203 million (CNY1.36 billion), Caixin Magazine reported yesterday.

The company announced its debt restructuring progress on Tuesday, claiming that it had penned a framework agreement with strategic investor Zkeji Holding Group Ltd. on Aug. 25. Wuyang Construction posted the statement on its own website, after the Shanghai Stock Exchange rejected it for procedural non-compliance and poor composition.

Less than 24 hours later, Zkeji denied the deal's existence in a strongly worded response on its website.

Wuyang Construction's Tuesday statement said that Zkeji had agreed to strategically reorganize Wuyang Construction via share enlargement and capital increase. Zkeji will provide a guarantee and authorize an investment fund to set up a USD303.4 million (CNY2 billion) to CNY3 billion buyout fund, and the proceeds will be used to cover Wuyang Construction's debt service costs and rationalize its bank loan structure, the statement said.

Zkeji refuted the statement, saying that it "has never contacted Wuyang Construction Group, and its senior management has not talked with the company. The CNY2 billion to CNY3 billion guarantee for setting up a buyout fund is also a sheer fabrication."

Zkeji was founded in Dec. 2012 as an investment subsidiary of state-owned China National Nuclear Corp.

After the 'bogus agreement' scandal, some investors accused Wuyang Construction of deliberately misleading the public and bond investors, asserting that it is not the first time that the firm tried such tricks. The group previously claimed that it had signed a similar reorganization contract, but nothing came of it, they said.

The Shanghai Stock Exchange has criticized the firm several times for failing to comply with information disclosure rules, an informed source said. Wuyang Construction is prone to delaying disclosure of negative news and overstating and fabricating positive news, the source said.

Wuyang Construction has deleted its statement from its website and WeChat account.

Wuyang is a private construction firm based in Zhejiang. It publicly issued two bonds worth CNY800 million and CNY560 million on the Shanghai Stock Exchange in 2015. Wuyang Construction defaulted on repayments of second-year interest and principal for the 2015Wuyan Bond, which triggered a default on the 2015Wuyan Bond02, Tebon Securities Co., the manager of the bonds, said on Aug. 14.