Shanghai-based traditional medicine giant Kangmei Pharmaceutical has become the first listed company in China to default on a bond repayment in the Year of the Rat.
Kangmei announced on 3 February that it would be unable to make payments for both the principal and interest of its “15 Kangmei Bond” (15康美债) on schedule.
2.4 billion yuan (approx. USD$343.14 million) of the instruments were issued on 6 March 2015, with a coupon rate of 5.33% and a maturity of 7 years.
Kangmei is no stranger to scandal, having become embroiled in one of the biggest cases of financial fraud in modern Chinese history last year.
A 10-month investigation by the China Securities Regulatory Commission (CSRC) that concluded on 16 August 2019 found that Kangmei had inflated revenues by 29 billion yuan (approx. $4.1 billion) and operating profits by 4.1 billion yuan during the period between 2016 and 2018.
CSRC said that Kangmei’s actions comprised a case of “premeditated and malicious cheating of investors,” and fined 22 of its employees a total of 5.95 million yuan for their involvement.
Earlier this year on 18 January Kangmei announced that it had executed a “Kangmei Pharmaceutical Outstanding Loan Bank Syndicate Contract”(康美药业存量贷款银团合同) for a three-year loan of 10.048 billion yuan, to be used to repay outstanding loans owed by Kangmei to syndicate members.
On the same date the Shanghai Stock Exchange issued a letter to Kangmei demanding that it raise funds as soon as possible to make payments for bonds on schedule.