Rear End Accident Triggering Railway Debt Crisis? First Sign Of Railway Debt

A sudden accident hit the fragile railway.

In July 23rd, Ningbo Wenzhou line had a rear end crash, and the related railway debt fell and sales increased.

Just two days ago, in July 21st, due to 6 incidents in the 5 days of Beijing-Shanghai high-speed railway, the railway debt encountered a rare dilemma in the history: the original issue of bonds was 20 billion, but the final effective bidding was only 18 billion 730 million, of which more than 18 billion were purchased by the joint underwriter, Nong hang and CDB.

After the 7 / 23 accident, the bonds related to railway construction fell sharply, especially the short-term financing bills issued by the Ministry of railways.

Railway debt has become the fuse to detonate the investment risk of bond market.

In the stock market, the first day after the accident was opened.

The channels for providing construction funds have been tightened almost instantaneously, and those projects that have already started are feeding on hunger, and the Ministry of Railways's capital situation is deteriorating rapidly.

"Railway construction relies mainly on bank loans, followed by issuing bonds.

The proportion of these two ways exceeds 50%, even as high as 70% and 80%. "

Li Hongchang, associate professor of economics and management, Beijing Jiaotong University, said.

Another industry analyst believes that if banks do not lend or increase interest rates, the blow to railway funds may be devastating.

Bonds are blocked

In the bond market, the Ministry of Railways has always kicked a piece of iron plate.

In July 21st, railway debt was first recorded in history.

Although the winning rate on the day was 5.18%, it was higher than the 5.05% valuation level of debt financing of non-financial enterprises, but the market did not buy it.

More than 18 billion of the 187.3 billion issued on that day were purchased by the joint venture underwriter, the Agricultural Bank of China and CDB, and the remaining 1 billion 300 million yuan had to be resolved by the co principal underwriters themselves.

7. 23 after the major railway traffic accident on Yongwen line, railway debts were sold off, but few people would like to take over.

A bond trader said: "although the pressure is heavy, there is little deal."

This is the third time the Ministry of Railways issued short-term financing bills this year.

Prior to March 31st and June 9th, the railway sector did not issue short-term financing bills.

In the first two months of this year, the Ministry of Railways has issued 3 ultra short term financing bills.

Up to this issue, the Ministry of Railways and subordinate enterprises have issued outstanding debt financing balance of 565 billion 500 million yuan, namely: China Railway Construction Bond 373 billion yuan, short-term financing certificate 60 billion 500 million yuan, medium term note 102 billion yuan, ultra short-term financing certificate 30 billion yuan.

At present, less than 100 billion yuan has been fulfilled.

"At present, the Ministry of Railways issues bonds to support projects under construction.

However, at present, railway debt is not optimistic in the near future.

The Merrill Lynch index showed that China's Ministry of railways had fallen 0.45% in July on the occasion of the rise in global rail debt, and is expected to decline for third consecutive months.

Pressure surge

The house is leaking for a rainy night.

Recently, there are reports that several major banks will re raise the new lending rate of the Ministry of Railways by 10%.

Previously, due to the fact that there were many entities in the Ministry of railways, with huge cash flow and deposits and settlement business, a series of businesses derived from loans were valued by banks. The interest rates of the Ministry of Railways loans from banks were mostly 10% lower than the bank benchmark interest rates.

"Recently heard that banks should be cautious in lending, and the difficulty of the Ministry of Railways from bank loans may increase."

Li Hongchang said.

According to the preferential policies of banks to the Ministry of railways, lending rates generally fall 10% and interest rates are about 5.9%.

Up to 6.49%.

According to the calculation of Beijing-Shanghai high-speed railway's loan of 1100 billion, the interest rate is 7 billion 139 million each year, 649 million more than the original interest rate, and the interest rate is 19 million 560 thousand yuan per day.

According to the current level of two trillion, the annual interest rate is 129 billion 800 million.

"Interest on floatation is only for new loans. Interest on the original project should not change."

CITIC construction investment analyst Li Lei said.

GF Securities (000776) released July 25th Research Report data show that the current high-speed rail production line including the Beijing Shanghai line, Wuhan Guangzhou line, Yongtai temperature, including 13, and the construction lines include Nanjing Hangzhou line, Beijing stone line, hada line, including 26, to be built lines including Shenzhen Hong Kong line, Jing Shen line, Xu Zhengxian 23.

The operation line has been put into operation.

The report shows that in 2010, the Ministry of Railways paid the principal and interest payments up to 150 billion 117 million yuan.

In 2010, the Ministry of railways had a cash flow of about 158 billion 700 million yuan.

If interest rates rise, the Ministry of Railways has little hope of making profits.

"Part of the investment comes from the railway construction fund, and a divisional province co operates to allow local output, mostly by bank loans, and partly by issuing bonds, which is a capital channel that has not changed for many years."

Dong Yan, Institute of comprehensive pportation research, national development and Reform Commission, said.

The content of railway construction funding sources in the 2010 China pport development report released by Minsheng Bank (600016) shows that the proportion of railway debt financing has increased from 48.83% in 2005 to over 70% in 2009.

It is understood that from 2008 to 2010, the Ministry of Railways repay principal and interest amount of 41 billion 782 million yuan, 73 billion 259 million yuan, and 150 billion 117 million yuan respectively.

At the end of the first quarter of 2011, the Ministry of railways had a total liabilities of 19836 billion yuan, with an asset liability ratio of 58.24%.

The crisis is coming.

"This motor car accident has undoubtedly increased the difficulty of financing by the Ministry of railways, and the future capital chain is on the verge of fracture."

Zhao Jian, a professor at the school of economics and management, Beijing Jiaotong University, told the media recently.

It is understood that at the end of the first quarter of 2011, the Ministry of railways had total liabilities of 19836 billion yuan, including long-term liabilities (bank loans and bond financing) of about 14181 billion yuan, and current liabilities of 565 billion 500 million yuan (short-term liabilities of about 90 billion 500 million yuan, payable 475 billion yuan).

"A single financing mode foreshadowed the railway's overall losses."

Insiders said.

The China Times reporter learned from the Ministry of railways that in the first half of this year, railway fixed assets invested 278 billion 116 million 260 thousand yuan.

Among them, investment in capital construction was 242 billion 195 million 150 thousand yuan, an increase of 2.7% and 3.1% respectively over the previous year.

In January this year, the same investment projects grew by up to 25.6% and 55.7%, and the growth slowed significantly.

According to the plan of reducing investment by 100 billion this year, it will increase negatively in the second half of the year.

However, even if the growth rate slows down, the total investment will not change.

In the first half of this year, 700 billion of the total investment was completed by 278 billion 100 million yuan, and 421 billion 900 million yuan will be invested in the second half of this year.

"The calculation has considered the capital increase of 100 billion yuan per year, and the debt ratio will exceed 70% at the end of 2015 when the scale of investment is maintained.

The scale and risk of debt financing have reached the acme. According to the provisions of the NDRC's minimum capital ratio for railway projects, 25% of the Ministry of Railways continue to increase debt financing.

CITIC Securities (600030) research report shows.

CICC believes that the issue of bonds issued by the Ministry of Railways will be blocked and debt financing will be more difficult.

Debt financing is more difficult and cost increases, which is related to the rise of the assets and liabilities ratio and profitability of the railway itself. It also shows that the liquidity of the credit market is not sufficient, which will cause hidden troubles for the Ministry of Railways in the future.