Dandong Port defaults on $150.7m in bonds

The sanctions on North Korea indirectly affected the port’s profitability, given that its core commodities were traded with North Korea, the South China Morning Post reported.    Dandong Port Group, which manages the largest Chinese port still trading with North Korea, failed to settle 1 billion yuan (U.S. $150.7 million) worth of bonds that matured at the end of October, the South China Morning Post reported.
   The port still has another 6.95 billion yuan worth of publicly traded bonds and bills, two thirds of which will mature at the end of next year. A source at China’s interbank market, where much of Dandong’s debt is bought and sold, told the South China Morning Post that the “chances of the company repaying the bonds were not good.”
   While the default is not directly connected with the sanctions imposed on North Korea, the region still suffered economically as coal trade with North Korea is one of the core commodities handled by Dandong Port, said the South China Morning Post. The sanctions have not been upheld by all, as the U.S. blocked four Chinese entities, including Dalian Global Unity Shipping Co., for ties to North Korea is July while the United Nations banned four ships from all global ports last month for violated North Korea sanctions.
   According to reports, Dandong Port was able to sell 2 billion yuan in five-year bonds with an annual coupon rate of 5.5 percent in January 2016, but was forced to raise the coupon to 8.5 percent to sell 550 million yuan worth of bonds several months later. The money raised was used to repay bank loans, and was still able to continue to accumulate debt, “partly because there was no record of a Chinese port defaulting on a bond issue,” said the South China Morning Post. “Because of their contribution to the economy, ports enjoy a tacit credit guarantee from local banks and authorities. In Dandong’s case, however, there is no pot of gold available.”