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China debt crunch

Chinese fashion group Shandong Ruyi fails to repay $153m bond

Underwriter calls on company to talk to and repay investors

Shares of SMCP, the French owner of Sandro, rose Monday even as parent company Shandong Ruyi failed to redeem a domestic Chinese bond.    © Reuters

HONG KONG -- Acquisitive Chinese fashion group Shandong Ruyi Technology Group on Monday missed the repayment deadline for a 1 billion yuan ($152.9 million) domestic bond.

Bank of Communications, the main underwriter of the bond, said on Monday evening that Ruyi had failed to prepare enough funds on time. The state-owned bank vowed to "supervise and urge" the company to come up with the cash needed to fully pay back investors in the three-year 7.5% bond along with 75 million yuan in interest.

The bank said it was asking Ruyi to "fulfill relevant follow-up disclosure obligations" and host a conference with bondholders. Ruyi had not released any statement as of the time of publication nor did it respond immediately to a request for comment.

Both the company and the underwriter sought to communicate with bondholders in advance, and a meeting had been planned for Dec. 8. However, it was abruptly called off one day before, with Ruyi citing a "need to adjust the agenda" without further details.

The meeting had been scheduled to discuss a proposal to extend the bond's maturity and spread repayment over the next three years.

Ruyi also faces a due date Tuesday for 75 million yuan in interest on a separate 1 billion yuan bond issued last year. This payment was originally due on March 15, but has been postponed twice -- to June 15 and then Dec. 15 -- with bondholders' consent each time.

Ruyi, once hailed as the "LVMH of China," established a global textile and apparel empire through aggressive acquisitions over the years, ranging from Cubbie Station, Australia's largest cotton farm, and stretch fabric maker Lycra Co. to fashion brands such as Aquascutum and Japan's century-old Renown.

The deals were largely financed by heavy external borrowings and Ruyi has recently been having difficulty paying back its creditors. Last December, a day after a $345 million offshore bond matured, the company issued a statement on Chinese social media to say it had been repaid.

On Monday, shares of SMCP, a French retail group with brands including Sandro, Maje and Claudie Pierlot and majority ownership by Ruyi, were trading 3.1% higher in Paris.

JAB Holding, a Luxembourg-based investment company, confirmed to Nikkei Asia on Sunday that a deal struck in 2018 to sell Swiss shoemaker Bally to Ruyi had been abandoned.

According to Ruyi's latest financial disclosure, covering the January-March quarter, it had only 4.58 billion yuan in cash on its consolidated balance sheet while the sum of short-term borrowing and noncurrent liabilities due within a year totaled 14.36 billion yuan.

Moody's Investors Service rates Ruyi "Caa3," which the agency defines as "speculative" and subject to "very high credit risk." The credit agency's annual review released in August said the rating "reflects [Ruyi's] refinancing risk, given its large upcoming debt maturities, continued weak liquidity and limited progress on its refinancing plans."

Dagong Global Credit Rating, a major Chinese agency, used to rate Ruyi, including the bond that missed the payment deadline on Monday, until mid-March. According to Dagong, the rating contract was cut off by Ruyi. The final rating was "AA-."

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