Shanghai-based Hilong Holdings has $165 million in debt that came due Monday.
Photo: Wang Jianhua/Zuma PressHilong Holding Ltd., a provider of oil-field services and equipment, said it wouldn’t be able to repay holders of a maturing dollar bond—the latest offshore default by a Chinese borrower.
Since May, Hilong has been pushing holders of the $165 million in bonds that came due Monday to swap them for new higher-coupon debt due in 2022, plus a partial payment in cash.
But Hilong has won approval from creditors holding just 63.45% of the debt, below its 80% minimum, the Hong Kong-listed company said in a filing on Monday. Hilong said it has extended the deadline to next Monday, hoping to consummate that deal to “cure the payment default.”
Heightened financial stress has shown up differently inside China than in international markets. Onshore, with their yuan debt, many companies have found ways to avoid or minimize defaults. But with offshore dollar bonds, Chinese companies account for nine of the region’s 12 defaults this year, ANZ credit analysts said in a June 12 note.
Before Hilong, defaulting companies this year included MIE Holdings Corp., an independent oil and gas producer that is also listed in Hong Kong, and Qinghai Provincial Investment Group, a state-owned aluminum maker.
Brayan Lai, a credit analyst with CreditSights in Singapore, said Hilong hadn’t exhausted all available options to get the bond-swap done, such as backing the new bonds with more collateral, or lowering the approval threshold from 80%. That shows the company is prioritizing creditors within China, he said. Lowering the threshold would force Hilong to use more of its cash to repay bondholders who aren’t participating.
Hilong has told creditors the pandemic has delayed payments from its customers, and that China’s foreign-exchange controls prevent it from sending onshore cash abroad, according to a memo of an investor conference call reviewed by The Wall Street Journal. Hilong didn’t respond to requests for comment.
Chinese companies can move cash offshore to repay bonds only if it registered the plan to do so with the authorities before first issuing the debt, said Zhou Hao, an economist at Commerzbank in Singapore.
The failure to repay will trigger a cross-default on $200 million more in bonds due in 2022. Those bonds, which carry an 8.25% coupon and were trading at above par as recently as mid-February, were quoted at 30.75 cents on the dollar Monday, according to Tradeweb.
FactSet data shows the company has total debt of 3.2 billion yuan ($452 million), with short-term debt of 1.7 billion yuan.
Write to Xie Yu at Yu.Xie@wsj.com
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