Unable to redeem upon maturity, credit risk impacts are coming! Multiple convertible bonds have fallen below face value.

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Recently, affected by factors such as performance losses, debt pressure, and market adjustments, the convertible bond market is once again facing a shock from credit risk.

Recently, ST Dongshi issued an announcement saying that the “Dongshi Convertible Bonds” it issued will mature on April 8, 2026, but the company’s existing cash cannot repay the principal and interest. The recent price of the Dongshi Convertible Bonds has been falling one after another, and it has fallen below the issue par value of 100 yuan per lot (bond). On April 2, during trading, it once dropped to 80.58 yuan per lot.

The possible default risk of the Dongshi Convertible Bonds has undoubtedly once again raised investors’ concerns about companies with relatively heavy debt repayment pressure. Recently, the Longda Convertible Bonds and Hongtu Convertible Bonds have also fallen below par value.

Dongshi Convertible Bonds warn of the risk of not being able to repay at maturity

Recently, ST Dongshi has issued multiple announcements stating that the company’s existing cash cannot repay the principal and interest of the “Dongshi Convertible Bonds,” urging bondholders to trade or convert as soon as possible.

The ST Dongshi announcement states that the company’s existing cash cannot repay the principal and interest of the “Dongshi Convertible Bonds.” Since March 2026, based on its own operating situation and cash position, the company has repeatedly released risk-warning announcements regarding the impending maturity of the “Dongshi Convertible Bonds” and the risk of non-payment at maturity and trading risk, giving full notice of the risk that the “Dongshi Convertible Bonds” cannot be repaid at maturity.

April 2 is the last trading day for the Dongshi Convertible Bonds. From April 3 to April 8, investors still holding Dongshi Convertible Bonds can only perform conversion operations. Against this backdrop, the price of the Dongshi Convertible Bonds has continued to fall recently, and on April 2, during trading, it once dropped to 80.58 yuan per lot.

In 2020, ST Dongshi raised 428 million yuan through the issuance of convertible bonds. As of April 1, the outstanding balance of bonds not yet converted still amounted to 94.8761 million yuan.

On March 20 this year, based on a comprehensive analysis and assessment of the company’s operating conditions and industry situation, United Credit downgraded the company’s long-term issuer credit rating from CCC to CC, downgraded the credit rating of the “Dongshi Convertible Bonds” from CCC to CC, and maintained a negative outlook for the rating.

The company is currently in a pre-reorganization stage, and whether it can enter the reorganization proceedings remains uncertain. United Credit believes that if the court accepts the applicant’s application for reorganization in accordance with the law, the company’s stock will be subject to a delisting risk warning. If it ultimately enters the reorganization proceedings, as of April 8, 2026, the claims held by the holders of the “Dongshi Convertible Bonds” registered on record will be included as reorganization claims to participate in repayment; the specific repayment plan and repayment timing will be determined according to the reorganization plan, and there is still considerable uncertainty at this stage.

United Credit further noted that the company expects that it will be unable to repay the principal and interest of the “Dongshi Convertible Bonds” on time, reflecting that its liquidity risk has further intensified. In addition, since the company is in the pre-reorganization stage and the amount involved in lawsuits is relatively high as a proportion of net assets, the company’s overall credit level has further declined.

Multiple convertible bonds fall below par value

The repayment crisis of the Dongshi Convertible Bonds has attracted market attention. As the first convertible bond in early 2026 that may fail to repay the principal and interest on time, the default risk of the Dongshi Convertible Bonds not only gives investors a deeper understanding of credit risk in the convertible bond market, but also prompts the market to re-evaluate the overall valuation and investment value of convertible bonds.

Besides the Dongshi Convertible Bonds, recently several other convertible bonds such as the Longda Convertible Bonds and the Hongtu Convertible Bonds have also seen their prices fall below par value. The issuers of these convertible bonds generally face problems such as performance losses, heavy debt pressure, and tight cash flow, leading the market to question their ability to repay.

A performance pre-announcement released earlier by Longda Foods shows that it expects net profit attributable to shareholders of the listed company to be a loss of 620 million to 760 million yuan in FY2025. The company said that due to industry cycle effects, the hog selling price and pork market prices have remained at low levels for a sustained period, causing large losses in its traditional business segments. At the same time, in accordance with relevant provisions of corporate accounting standards, the company has made impairment provisions for inventories and biological assets.

After the performance pre-announcement was released, United Credit downgraded the company’s individual credit rating from a- to bbb, and downgraded the company’s long-term entity credit rating from A to BBB. It also downgraded the credit rating of the “Longda Convertible Bonds” from A- to BBB, and maintained a negative outlook for the rating.

United Credit believes that the “Longda Convertible Bonds” have an outstanding balance of 946 million yuan that has not yet been converted, and the company has failed to complete conversion for a long period. The Longda Convertible Bonds will mature in July 2026. As the bond maturity date approaches, the company’s pressure to repay at maturity will continue to increase. In addition, violations in accounting treatment have exposed weaknesses in the company’s financial internal controls and information disclosure management, which will have an adverse impact on the company’s refinancing environment and overall repayment ability.

The Hongtu Convertible Bonds also fell below par value in a single day on April 2. An announcement released earlier by Aerospace Hongtu said that, based on the company’s initial estimates from its finance department and communications with its annual audit accounting firm, it expects that net profit attributable to owners of the parent company for FY2025 will be -1.17B yuan. Given that the current audit work has not yet been completed, the relevant data may have some uncertainty, which could cause changes in net assets at year-end. If the final amount of net profit loss is large, the audited net assets at year-end for FY2025 may turn negative. If the company’s audited net assets at year-end are negative, or if the net assets at the end of the most recent accounting year after retrospective restatement are negative, the company may be subject to a delisting risk warning after the FY2025 annual report is disclosed.

Given the company’s significant losses in 2025, China Chengxin International downgraded the company’s issuer credit rating from BBB+ to BBB and maintained a negative outlook; it also downgraded the credit rating of the “Hongtu Convertible Bonds” from BBB+ to BBB.

China Chengxin International believes that since 2025, the company’s profitability indicators have clearly weakened; it is still expected to incur substantial losses throughout the year and result in a negative equity scale. Its ability to generate cash from operations is weak, and it faces significant pressure on operational turnover and debt repayment. At the same time, affected by the pause in military procurement qualifications until July 2027, the company’s future profitability and debt repayment ability are still expected to face a risk of further deterioration. Although the company actively coordinates external resources, the substantive progress made is relatively slow. The company faces very heavy short-term debt repayment pressure. In addition, if the company’s audited net assets at the end of 2025 are negative, it will be subject to a delisting risk warning after the FY2025 annual report is disclosed; the possibility that conditional redemption provisions for the “Hongtu Convertible Bonds” will be triggered is greatly increased, and the company’s debt repayment pressure will further intensify.

Institution: More are individual risk events

Convertible bond risks are rooted in the dual attributes of “debt-like” and “equity-like.” The core comes from the combined effect of shortcomings in issuer qualifications and changes in market policies. On the operating side, due to factors such as fluctuations in the external environment, mismatches within cyclical industries, impairment of merger goodwill, and corporate governance defects, the company’s operations face pressure. On the market side, weak equities weaken the logic for conversion, compounded by tighter new delisting rules; the liquidation and exit of weakly qualified issuers accelerates, and credit risk and delisting risk become deeply linked.

In recent years, with the implementation of the new delisting rules, the number of cases where listed stocks have been delisted due to triggering delisting indicators such as financial-type, trading-type, major illegal-type, and standardized-type matters has gradually increased. After a listed stock is delisted, convertible bonds typically also delist. While delisting is not equal to default, judging from convertible bond cases that have already delisted so far, because the issuer’s operating conditions deteriorate and funding is scarce, the risk of default for delisted convertible bonds is extremely high, and delisting has become the most severe risk in the convertible bond market.

As performance reports are concentrated recently, some companies have posted large performance losses, and investors inevitably worry that the frequency of credit events will increase. In response, West China Securities believes that as long as equity market expectations are not weak, the impact of individual risk events is likely to be limited to the individual itself and it is unlikely to cause widespread contagion on a large scale.

Tianfeng Securities stated that currently the ongoing conflict between the U.S. and Iran continues to build up and suppress global risk appetite. Meanwhile, in China, from January to February, the profits of industrial enterprises above a designated size rebounded significantly, supporting relatively optimistic expectations for the equity market’s fundamentals. Against this backdrop, combined with the earnings season, the convertible bond market may still face triple pressure: first, structural risks mainly centered in small- and mid-cap segments; second, overall valuations still remain relatively high; third, credit risk events during the earnings period may be worse than expected.

Source: Securities Times official WeChat account

Statement: All information in Data Treasure does not constitute investment advice. The stock market is risky; investment requires caution.

Editors: Zhou Sha