Top China Chipmaker Says It Hasn’t Defaulted, Has Ample Cash

(Bloomberg) -- Tsinghua Unigroup Co. moved to reassure bondholders in the wake of a plunge in its debt that its finances are in good shape.

The company has a key role building China's domestic chip industry and will get continuous support from its controlling holders for healthy development, its listed unit Unisplendour Corp. said in a filing to the Shenzhen stock exchange. The group has abundant cash and liquidity and hasn't defaulted, the statement said.

In recent days, investors dumped dollar debt issued by the Tsinghua Unigroup, a subsidiary of Tsinghua University, pushing prices to record lows, amid concern about its finances as well as the strength of state support.

Tsinghua's bonds made a slight recovery after its executives said on Friday that the firm has more than 17 billion yuan ($2.4 billion) of cash in the offshore market, as well as credit lines of 250 billion yuan. The company's bonds maturing in 2021 and 2023 were both largely steady on Thursday.

Tsinghua Holdings Corp. has no plan for further stake changes in Tsinghua Unigroup, according to Unisplendour. Tsinghua Holdings, the parent company with a 51% holding, sought to sell a 36% stake to a local government investment arm in the southern city of Shenzhen last year. However, the company said in August it has canceled the plan.

Tsinghua Unigroup's debt-to-asset ratio jumped to 73.42% last year from 62.09% in 2017 and 59.09% in 2016, after the company went on a borrowing spree to finance takeovers and other investments to boost its position in the chip industry.

Tsinghua Unigroup is an indirect controlling holder of Unisplendour Corp. and an affiliate of Unigroup Guoxin Microelectronics Co.. Unisplendour's shares dropped 4% on Wednesday while Unigroup Guoxin fell by the 10% daily limit on Wednesday. Both stocks were trading up by at least 0.9% on Thursday morning.

Earlier last week, Peking University-backed Founder Group also saw a bond selloff amid concern about its finances. The firm has posted “big” losses in the past three years as its core business in the IT sector faces fierce competition and its pharmaceutical business also has low profitability, Lianhe said in a June report. Its dollar note due 2023 remained near a record low on Thursday, despite having secured a commitment from from China Cinda Asset Management Co. for 8 billion yuan in loans backed by assets.

READ: Bond Plunge Throws Spotlight on China's Top Universities

--With assistance from Rebecca Choong Wilkins.

To contact Bloomberg News staff for this story: Neha D'silva in Hong Kong at ndsilva1@bloomberg.net;Jessica Sui in Beijing at jsui3@bloomberg.net

To contact the editor responsible for this story: Richard Frost at rfrost4@bloomberg.net

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With assistance from Bloomberg