Missed bond payment by China’s state-owned Peking University Founder Group shocks investors

Peking University Founder Group, controlled by China’s top university, misses payment on a 2 billion yuan (US$283 million) onshore bond, citing liquidity crunch

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Peking University in Beijing. The university controls Peking University Founder Group, which has in interests in industries ranging from software development to property. Photo: Xinhua

Published: 9:20pm, 3 Dec 2019Updated: 10:58pm, 3 Dec 2019

Chinese state-owned conglomerate Peking University Founder Group missed payment on a 2 billion yuan (US$283 million) onshore bond, shattering the market’s confidence in companies previously considered as low-risk.

The company controlled by Peking University, a top Chinese college, could not service the 270-day bond because of a liquidity crunch, it said in an exchange filing on Monday.

It is the latest in a spate of defaults by Chinese companies. Tunghsu Optoelectronic Technology too missed an interest payment on its 1.7 billion yuan (US$241 million) onshore bond on Monday.

Founder Group, which operates in industries from software development to securities trading and real estate, is “actively seeking funding through various channels and strengthening operations” to ensure repayment of the bond, it said.

The default came as a surprise to China’s onshore investors, as Founder Group was rated AAA, the highest level by domestic rating agencies including China Lianhe Credit Rating. The agency lowered Founder group’s long-term rating to A with a negative outlook on Monday.

Analysts said investors were likely to re-examine their previous perception that such firms – especially with the backing of top universities owned by the Ministry of Education – would not fail their debt obligations.