SMCP Parent Defaults on Bonds; Operations Safe, Company Says

BY Dow Jones & Company, Inc. | CORPORATE | 09/23/21 02:52 AM EDT By By Joshua Kirby

SMCP SAS said Thursday that it has been notified of a credit default by its controlling shareholder, but stressed that the situation doesn't put the company at risk.

The French fashion group said bond trustee GLAS had notified it of a failure by European TopSoho, a subsidiary of struggling Chinese apparel conglomerate Shandong Ruyi Technology Group, to redeem bonds worth 250 million euros ($292.2 million) by their maturity date on Tuesday. The Luxembourg-based holding company has until Sept. 30 to remedy the default, SMCP said.

The bonds, which are exchangeable into SMCP shares, are underwritten by shares representing 37% of the group's share capital, according to SMCP. European TopSoho holds around 53% of the group's shares.

The development doesn't put into question SMCP's financing and operations, the company said.

Last week, shareholders represented by business-ethics group Gouvernance en Action wrote to the company setting out their concerns over what would happen in the case of such a default by the controlling shareholder.

"The situation is alarming for the future of SMCP, its minority shareholders, its employees and all other stakeholders," GeA's Fabrice Remon said in the letter, which was also sent to the French capital-markets authority.

European TopSoho and Shandong Ruyi did not respond to requests for comment.

Write to Joshua Kirby at; @joshualeokirby

  (END) Dow Jones Newswires
  09-23-21 0252ET
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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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