MOR issues another round of bonds

The Ministry of Railways (MOR) issued 15 billion yuan ($2.35 billion) of super short-term commercial papers Thursday, after a similar issue of 20 billion yuan on August 8.

The rate of the 90-day commercial papers issued Thursday will be decided by the bid this time. The ministry said the funds would be used to build rail lines, purchase locomotives and improve the ministry’s liquidity.

The issuance on August 8 was the first by the MOR after last month’s fatal train crash and the 90-day commercial papers were auctioned at a rate of 5.55 percent, which is 1.63 percentage points higher than that of a similar bond issued in February, according to figures from China Central Depository & Clearing Co.

The issuance of another round of bonds after such a short gap has raised concerns about the ministry’s ability to repay the debt.

“There is no doubt the ministry can make good on its debts. After all, it’s a department under the State Council, and the government will handle its financial problems in the end,” Wang Haoyu, a bond analyst at Shenzhen-based First Capital Securities, told the Global Times Thursday.

The ministry had planned to issue short-term (366 days) financing bonds of 20 billion yuan on July 21 but failed “mainly due to inadequate market liquidity,” said Wang.

According to China Central Depository & Clearing Co, five types of bonds with the total of up to 55 billion yuan issued by the MOR previously will expire between July 30 to August 22.

“Issuing new bonds to pay for the old ones is also one of the reasons why MOR issued new commercial papers in quick succession,” Wang said.

Liu Mingkang, chairman of the China Banking Regulatory Commission, warned about the MOR’s debts at a conference in July, asking, “when can they repay the high debt?”

Chinese rating agency Dagong assigned the long-term rating of AAA to the MOR last week, which raised doubts about Dagong’s credibility because the MOR has been subject to public fury after the July 23 Wenzhou train crash.

Global Times

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