Huachen Energy Co., a Chinese power producer, plans to present a debt restructuring proposal to investors as early as August. This plan specifically targets $627 million in dollar-denominated notes and aims to alleviate ongoing liquidity pressures. As part of this restructuring, the company intends to launch a consent solicitation to extend bond maturities, with a goal to complete the extension process by December.
The company recently missed an interest payment on its dollar-denominated bonds on June 21 but assured investors that the outstanding interest would be paid within the 30-day grace period to avoid a default. Beijing-headquartered Huachen has appointed China International Capital Corp. (CICC) as its debt restructuring advisor. This marks another attempt at restructuring, following a successful court-approved debt restructuring in 2021 where dollar-denominated bond maturities were extended by five years, until December 2026.
Huachen's management informed investors that the company's ability to repay debt has been affected by a substantial debt burden, coupled with challenges in China's coal-fired power plant industry. These challenges include declining electricity prices and the rapid expansion of renewable energy, which have negatively impacted revenue. The company reported revenue of 1.73 billion yuan last year with a gross profit margin of 18.5%. Its dollar-denominated bonds were recently trading at approximately 61 cents per $1 par value, reflecting the market's perception of high credit risk. The company currently has interest-bearing debt of approximately 1.4 billion yuan, or about $2.06 billion, excluding two bond issues currently undergoing restructuring.
