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China's Henan registers first successful bond issue by state firm since default shock

SHANGHAI/BEIJING, Dec 29 (Reuters) - Henan Investment Group issued a bond on Monday that was more than three times oversubscribed, underwriters said on Tuesday, marking the first successful bond issuance by a state-owned company in Henan province since a shock default on Nov.10.

The missed repayment by state-owned Yongcheng Coal & Electricity Holding Group Co had led to a slew of canceled bond issues by state companies in the province.

But, the successful sale on Monday of a 360-day bond by Henan Investment Group, a financing vehicle owned by the provincial government, showed investors regaining confidence.

Henan Investment, which is raising up to 500 million yuan ($76.55 million), sold the bond at a rate of 3.44% and the issuance was 3.36 times over-subscribed, three underwriters told Reuters.

A flurry of high-profile defaults by state firms including Yongcheng Coal had persuaded investors to avoid bonds issued by companies perceived as weak, triggering a funding squeeze.

Chinese companies have canceled or delayed issuance of nearly 200 bonds worth 145.7 billion yuan ($22.31 billion) since early November, state media reported.

China’s central government has so far avoided bailing out troubled state firms. Last week, China’s central bank said bond defaults could serve to weed out weakness and ultimately strengthen the market.

Meanwhile, Beijing has vowed zero tolerance toward misbehavior in capital markets. Regulators have launched a probe into Yongcheng coal and its underwriters. ($1 = 6.5319 Chinese yuan renminbi) (Reporting by Hou Xiangming, Huang Binbin and Emily Chow; Writing by Samuel Shen; Editing by Simon Cameron-Moore)

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