China Datang eyes loan after share pledge clause breach


  • Banking
  • Wednesday, 19 Feb 2020

The 2018 financing, borrowed by China Datang Corp.’s unit China Datang Overseas Hong Kong Co., was secured by about 3.3 billion of shares in Hong Kong-listed Datang International Power Generation Co.

HONG KONG: A unit of a Chinese state-owned power company is seeking a HK$5 billion ($644 million) one-year loan that will refinance an earlier 2018 deal after the company breached a default clause, according to people familiar with the matter.

The 2018 financing, borrowed by China Datang Corp.’s unit China Datang Overseas Hong Kong Co., was secured by about 3.3 billion of shares in Hong Kong-listed Datang International Power Generation Co. The breach came after the value of the pledged shares fell below the outstanding loan amount for more than 10 straight trading days, said the people, who are not authorized to speak publicly and asked not to be identified.

Shares of Datang International have tumbled 36% in the past 12 months and are trading near their lowest levels since 2003. The company said last month its power generation in 2019 fell amid a slowdown in national electricity consumption growth. While the recent shift in coal-fired power tariffs to a market-based mechanism may mean more flexible prices, it could strain profits for power generators.

China Datang Corp. and Datang International didn’t immediately reply to emails seeking comment.

The earlier loan, with proceeds used for subscribing additional shares in Hong Kong-listed Datang International, has about HK$4.9 billion outstanding, said the people. The three-year deal is led by mandated lead arranger and bookrunner CMB Wing Lung Bank.

The one-year bullet refinancing will continue to be secured by the share pledge and feature a letter of comfort from the parent company China Datang Corp, same as the earlier loan signed in February 2018, said the people. - Bloomberg

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