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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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China’s Oil Industry Is In Crisis

  • The low oil prices and the economic slowdown from the COVID-19 pandemic have hit the finances of Chinese companies hard. 
  • Another Chinese oil firm has defaulted on a dollar-denominated bond.
  • Hilong Holding is currently assessing the impact of the default on its other indebtedness. 

 

Another Chinese oil firm has defaulted on a dollar-denominated bond, bringing the total value of defaults in all sectors of China’s offshore bond market to US$4 billion so far this year, more than double the value of defaults in the same period last year, Bloomberg estimates.

 

Oil equipment and oil services company Hilong Holding said on Monday that it is defaulting on a US$165-million bond after an insufficient percentage of noteholders had agreed to swap the notes with new debt. The minimum acceptable level of noteholders to agree to the debt exchange offer was 80 percent, while just 63.45 percent had agreed to tender notes for the exchange offer.  

 

“As previously announced, without a consummation of the Exchange Offer, the Company does not and will not have alternative financing means available to repay the Existing Notes upon maturity,” which was June 22, the company said.

 

Hilong Holding is currently assessing the impact of the default on its other indebtedness, it said.

Related: Why The $17.5 Billion Write-Down Is Just The Beginning For BP

 

Earlier this month, Fitch Ratings downgraded Hilong Holding’s Long-Term Foreign-Currency Issuer Default Rating to CC from B to reflect the high refinancing risk related to the US$165-million 7.25% senior unsecured notes due on June 22. According to Fitch, low oil prices may result in a longer-term deterioration in Hilong Holding’s credit metrics as sales decline and margins contract.

 

The low oil prices and the economic slowdown from the COVID-19 pandemic have hit the finances of Chinese companies, including such in the oil industry, and defaults in its so-called offshore bond market have accelerated in recent months.

 

Last month, Hong Kong-listed oil exploration firm MIE Holdings Corporation defaulted on a dollar-denominated bond, becoming the first victim from the oil sector in China’s offshore bond market. Independent oil refiner Shandong Qingyuan Group later also failed to pay a principal installment of a US$1-billion loan.  


By Tsvetana Paraskova for Oilprice.com


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  • Rudolf Huber on June 23 2020 said:
    China is trying frantically to keep its economy humming. But even without COVID and the Trade war, it would be in dire straits. And this filters through to all sectors of the economy. One can only build so many crumbling ghost cities. One can only store so much oil and produce so much steel that stacks up before something gives. And the longer the rot lasts, the harder the eventual disintegration will be. China is the mother of all Ponzi schemes and no matter how much band-aid its many open wounds get, for every one economic wound that gets taken care of, three more open up.

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