CHINA Cloud Live Tech Group, a restaurant chain that abruptly shifted into cloud computing and is under regulatory scrutiny, could become the first Chinese company to fail to repay principal to domestic bond investors.

    China Cloud Live is in danger of defaulting on 240.6 million yuan (US$38.8 million) in interest and principal payments to bond investors due Tuesday, the Shenzhen-listed firm said in a stock exchange filing Friday.

    Cloud Live said it had raised 161.4 million yuan to pay back about 400 million yuan in debt sold three years ago. The firm said it might not be able to pay back the remainder. “To all bondholders, we extend our most sincere apologies!” it said in the filing.

    The first bond default by a listed firm in China occurred last year, when Shenzhen-listed Chaori Solar Energy Science & Technology Ltd. missed interest payments worth 89.8 million yuan.

    However, the Chaori default, initially hailed as a major step forward in rationalizing the price of credit in China by allowing companies to default on bonds, ended up with a bailout for investors.

    Another company, Xuzhou Zhongsen Tonghao New Board Co., missed an interest payment last year, but regulators said the bond’s guarantor had agreed to pay investors back.

    Potential Chinese corporate bond defaults have been closely watched amid a slowdown in the country’s growth and as companies in a number of industries grapple with high debt levels.

    China Cloud Live posted a notice Thursday on the Shenzhen Stock Exchange website, saying trading in the firm’s stock and bonds was suspended as of Thursday, but will resume Tuesday if the firm is able to make the payment.

    China’s corporate bond market has grown quickly as companies seek new funding sources. The volume of domestic corporate bonds issued rose 46 percent in 2014 to 696.2 billion yuan from 475 billion yuan a year earlier, according to ChinaBond, a data service run by China Central Depository & Clearing Co.

    China Cloud Live’s Thursday disclosure to the Shenzhen exchange was the latest development in a run of trouble for a tech company that until last year ran restaurants and was famous for delicacies such as fish heads. In December, regulators said they were investigating whether chairman Meng Kai violated securities laws. He resigned in early January, the company said.

    As of late December, regulators had frozen Meng’s shares in China Cloud Live, which represent a stake of nearly 23 percent. (SD-Agencies)