Monday, June 16, 2014

Carlyle's China Forestry Enters Debt Default?

Bloomberg reported:

China Forestry Holdings Co., a timber producer backed by private equity firm Carlyle Group LP, faces a payment deadline on its U.S. dollar bonds today as it seeks more time to audit its books and complete a debt buyback. 

The company must pay the overdue half-yearly 10.25 percent coupon on $180 million of November 2015 securities to avoid a default, according to a May 16 Hong Kong stock exchange filing. A one-month grace period expires today. China Forestry paid the previous coupon in November after a similar delay. 

“They’re effectively in default by our definition,” Johnson Ng, an analyst in Hong Kong at Standard & Poor’s, said by phone June 13. “The nature of their business requires a lot of capital for harvesting and trading. We think they’ll face difficulty in getting financing support, especially against the backdrop of accounting issues.” 
The Hong Kong stock exchange suspended trading China Forestry’s stock in January 2011.  China is the wild, wild east for investment and product safety.  A bond default won't kill Chinese infants, unlike toxic baby formula (another Carlyle investment - Yashili).  China Forestry is more like spilled milk, that soured KPMG and Carlyle's reputations.