Industrial Bank and Everbright Bank Under Investigation over Bond Default of State-owned Coal Enterprise Yongcheng

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A trio of China’s leading commercial banks will be investigated for their role in underwriting the bonds of Yongcheng Coal & Electricity Holding Group, following the Henan’s energy company’s default on one billion yuan in debt.

Industrial Bank Co., China Everbright Bank and ZY Bank are suspected of conduct in breach of interbank bond market disciplinary rules during their role as lead underwriters of the Yongcheng Coal bond issuance, according to an announcement made by the National Association of Financial Market Institutional Investors (交易商协会) (NAFMII) on 19 November.

NAMFFI said that Xigeme Certified Public Accountants, China Chengxin International Credit Rating and Haitong Securities are also suspected of conduct in breach of regulations.

Yongcheng announced on 10 November that it was defaulting on one billion yuan (approx. USD$152 million) in short-term bonds that it had issued just weeks previously.

The coal company is a major subsidiary of Henan Energy and Chemical Industry Group Co., Ltd. – the largest state-owned enterprise in Henan province.

Henan Energy holds a 96.01% stake in Yongcheng, and has had its credit rating reduced from AAA to BB by Chengxin International Credit Rating since the default.

According to domestic media reports Yongcheng currently has a total of 23.41 billion yuan in outstanding bonds, with 12 billion yuan scheduled to mature within a year.

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