MONGOLIAN Mining Corp (MMC) is continuing discussions with bondholders to restructure its bonds on which it has reneged on a coupon payment. The Hong Kong Stock Exchange-listed company is also examining all financing options in a very difficult period for coal mining companies.
The miner is grappling with decade-low coking coal prices which have impacted heavily on its Ukhaa Khudag (UHG) open pit mine within the Tavan Tolgoi coal formation in the South Gobi region along. It also has the Baruun Naran coking coal mine about 30km from UHG.
The company owes a US$26.6 million coupon on its US$600 million 8.875% bonds due 2017, which was payable on March 29 and deferred until April 29. In a statement issued on April 29 it said that none of its bondholders had sent any notice demanding immediate repayment of their dues. The bonds have traded at the extremely stressed levels of 15-20 cents on the dollar since January.
In March MMC also said that it didn’t make principal and interest payments on a $200 million loan facility and wasn’t able to get a temporary waiver from banks, triggering a cross-default on the notes and other liabilities. It failed to make the payments on the loan facility taken from BNP Paribas SA and Industrial & Commercial Bank of China Ltd.
MMC, which took the loan facility to repay another debt, has proposed forbearance agreements with the banks, and will discuss the matter with the steering committee of the note holders and their advisers, it said.
The company mines and exports coking coal, which is used in steelmaking. China’s weakest economic growth in a quarter of a century and shift towards a consumer-led economy has added to strains in the global coal and steel industries.
Asian peers including PT Berau Coal Energy, Winsway Enterprises Holdings and Hidili Industry International Development have also reneged on bonds while Peabody Energy Corp, the largest US coal miner, filed for bankruptcy in April.
Industry experts believe there is little hope of being able to turnaround the dire financial situation of MMC in the near future.