(Aug 3): A Chinese municipal borrower said it has enough funds to repay 1.08 billion yuan (RM660 million) in offshore notes due next week, after people familiar with the matter said a plan to refinance that debt with a new bond sale had been delayed.

Luoyang Shangdu City Investment Holding Group Co was scheduled to price a 364-day yuan-denominated offshore bond last Friday to help repay the notes but the deal was postponed due to disagreements with investors over pricing, the people said, asking not to be identified as the matter is private.

The local government financing vehicle said it has ready cash and will repay two yuan offshore bonds — a 6.9% bond and a 7.9% note — both set to mature on Aug 11, on time, responding to queries from Bloomberg News. The company didn’t provide further details and declined comment on whether it will try to sell the offshore bond again this week.

The circumstances surrounding Luoyang Shangdu show the challenges faced by distressed LGFVs in the country despite government support as they try to exhaust all means to meet debt payments.

Thousands of LGFVs have built up massive debt after years of helping China’s towns and cities raise funds for a range of infrastructure projects including roads and public housing. They have about 16 trillion yuan worth of bonds outstanding, with roughly five trillion yuan set to mature by the end of 2027, according to data compiled by Bloomberg.

The company, based in China’s central Henan province, showed signs of financial distress after it was placed on a Chinese court list in October following its failure to pay a court enforcement claim of 322,354 yuan, according to its filing to the Shanghai Stock Exchange. It also had 10 million yuan in overdue payments outstanding as of end-April this year, according to a person with knowledge of the matter who spoke on condition of anonymity.

It reported 16 million yuan in profit last year on revenue of 250 million yuan, with its liability-to-asset ratio at 67.33%, according to a separate filing to the Shanghai Stock Exchange. Its 6.9% bond was indicated at around 97% of its face value on Friday, according to Bloomberg-compiled data.

LGFVs were once flagged as the top financial risk in Asia but borrowing costs fell to a record low after China told banks and provincial governments to help LGFVs repay domestic and offshore debt maturing no later than June 30, 2027.

However, some weaker LGFVs have been facing refinancing pressure following a slew of measures taken by Chinese regulators, Bloomberg has reported. They’re also discouraged from raising money offshore at higher yields.

Uploaded by Arion Yeow