CHINESE firms canceled more than four times the amount of bond offerings in April compared with a year earlier as defaults by State-owned enterprises increased financing costs.

    At least 37 firms postponed or scrapped 35.2 billion yuan (US$5.4 billion) in planned note sales through Wednesday, compared with nine companies pulling 12.4 billion yuan a year ago. About half of the cancellations took place last week after State-owned China Railway Materials Co. halted its bond trading Monday last week.

    “Credit risk is spiking with recent defaults, so the market is in a panic,” said Ji Weijie, a credit analyst at China Securities Co. “No one wants to buy low-rated bonds right now. The China Railway Materials incident has had the biggest impact on the market recently because the company has a high rating of AA+ and it is completely State owned.”

    The surge in scrapped offerings reflects growing concern about default risks amid the worst economic slowdown in a quarter century. Yields on five-year AA- rated local corporate notes have jumped 27 basis points this month, set for the biggest increase in 13 months.

    Shanxi Jincheng Anthracite Mining Group Co. canceled a 2 billion yuan bond sale Wednesday and Shandong Heavy Industry Group Co. pulled an offering of 1 billion yuan of notes Tuesday.

    China Railway Materials said Wednesday it’s seeking to restructure its debt, raising the risk of another default by a State-owned firm after Baoding Tianwei Group Co. last year became the first government-backed firm to renege on onshore bonds. The firm halted trading of a combined 16.8 billion yuan in bonds. (SD-Agencies)