Mongolian Mining Seeks Debt Moratorium as It Outlines Winding Up

by David Yong — July 8, 2016 — 10:15 AM SGT

• Company had $50.7 million in cash, $795.2 million borrowings

• Debt plan includes new bonds and shares to repay creditors

Mongolian Mining Corp. said it’s seeking a debt moratorium from a court in the Cayman Islands as it unveiled a proposal to repay bondholders and lenders.

It filed a petition for a winding up on July 7 and for the appointment of provisional liquidators to facilitate its effort to restructure its debt, it said in an exchange filing. The company had $50.7 million of cash and almost $795.2 million of borrowings at the end of 2015, according to its published accounts.

The Hong Kong-listed coal miner adds to a list of companies including PT Berau Coal and China Fishery Group Ltd. that have turned to court protection to fend off creditors as a slowdown in regional economies drains cash flows. There have been 96 bond defaults globally this year, S&P Global Ratings said in a statement on July 8, 50 percent more than this time last year.

In today’s filing, Mongolian Mining proposes to repay its creditors and lenders in three portions, by issuing: $420 million of new six-year dollar bonds with coupons pegged to future coal prices; $150 million of perpetual notes with variable coupons, and 1.03 billion of new shares.

“We like the indicative terms of the restructuring as interest rates are linked to coal prices, reducing the pressure on MMC to service debt when prices are low,” Trung Nguyen, an analyst at Lucror Analytics in Singapore, wrote in a note. “The haircut on the principal was less than what we had expected.”

Mongolian Mining failed to service a $200 million facility and couldn’t get a waiver from its lenders that triggered a cross default event on its foreign-currency bonds, it said in a filing in March. The miner later missed the semi-annual interest payment in April on its $600 million of notes despite a one-month grace period, it said in a filing in April.

Restructuring Proposal

Its 8.875 percent 2017 notes gained 0.3 cents to 23.31 cents on the dollar as of 9:15 a.m. in Hong Kong, according to prices compiled by Bloomberg. The company hired JPMorgan Securities and SC Lowy Financial as advisers in January to restructure the notes.

The company mines and exports coking coal used in steelmaking. China’s weakest economic growth in a quarter-century and shift toward consumer-led expansion has added to strains in both industries. Asian peers including Bumi Resources, Winsway Enterprises Holdings Ltd. and Hidili Industry International Development Ltd. have reneged on bonds. Peabody Energy Corp., the largest U.S. coal miner, filed for bankruptcy in April.