Oil Crash Claims First Victim in China Offshore Bond Market

(Bloomberg) -- A Hong Kong-listed oil explorer became the first casualty of the spectacular oil price slump in China’s offshore bond market, after defaulting on a dollar note. MIE Holdings Corp. failed to deliver an interest repayment
of about $17 million for its 13.75% dollar bond due 2022 after a 30-day grace period expired Monday, according to a filing to the Hong Kong stock exchange. This triggered cross defaults on other loan facilities, it said. Potential loan repayment demands, unfulfilled repayment obligations and possible breaches on loans and notes amount to over $287.3 million, it added. MIE is the latest energy firm to stumble under a debt load.

Across Asia, commodity firms from Vedanta Resources Ltd. to oil refiner Shandong Qingyuan Group Co. are showing stress after a historic slump in oil prices. Oil is down about 60% this year with little clarity over when global consumption will be back to
pre-virus levels.

“MIE was already in distress for the past one to two years, so the default came as no surprise,” said Leonard Law, analyst at Lucror Analytics. “The crash in oil prices was the hammer blow for the company as it meant they would not be able to recover.”

MIE Holdings, which has an interest in an oilfield in the Jilin province, saw its cash and equivalents shrinking to $2 million as of end 2019 from $6.7 million in the previous year, according to Bloomberg-compiled data.

“The company is experiencing increasing liquidity pressure due to the significant decline in revenue and cash flow caused by recent plunge in crude oil prices,” MIE said. The company is discussing the debt restructuring with its advisors and creditors, which is expected to address its liquidity concerns, it said.

Trading in the Hong Kong-listed shares has been suspended since April 1. The stock has plunged 45% this year. The prospects for a recovery in oil prices remain gloomy because of the high levels of crude oil in storage and the supply cuts that aren’t deep enough to counter the drop in demand, MIE said.

By Annie Lee, Rebecca Choong Wilkins and Denise Wee