China

Wang Yizhi sensed an opening last July when local investors raced to dump the debt of Future Land Development, a Shanghai-based developer, after the arrest of its founder on sexual abuse charges, the Financial Times reported. Shortly after the scandal broke, Mr Wang, general manager of Raman Capital, bought four-year bonds for 88 cents on the dollar. Within weeks, he had sold them for 95 cents, after the developer put dozens of projects on sale to improve its cash flows.

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Most of China’s provinces are expecting slower economic growth in 2020, underlining the nationwide trend which is expected to result in a tweaking of the formal goal when the legislature meets in March, Bloomberg News reported. Twenty-two of 31 major cities, provinces and autonomous regions have so far cut their 2020 target for gross domestic product expansion, according to their work reports which lay out plans for this year. Twelve provinces, which made up 42% of China’s economic output at the end of September last year, expect growth at around 6% or lower this year.

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Amid rising defaults and tighter liquidity for Chinese privately-owned enterprises, the nation’s banks are letting some companies fail, something Deutsche Bank AG says presents bigger opportunities for foreign investors in troubled debt, Bloomberg News reported. The German lender is an active distressed player in Asia Pacific and has bet on some of the biggest restructuring in the region, including commodities trader Noble Group Ltd. China is taking steps to allow more foreign investment into the country’s 2.37 trillion yuan ($344 billion) non-performing loan market. It will give U.S.

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Shandong Ruyi is facing serious disruption to its access to cotton supplies after the company, once hailed as the “LVMH of China”, was placed on an industry blacklist that will halt much of its trading in the commodity with major global groups, the Financial Times reported. Details from a recent arbitration case with a Bangladeshi group, in which Shandong Ruyi was ordered to pay compensation but has not, have also shone a spotlight on the extent of the Chinese company’s difficulties in paying off debts.

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Zambia is already restructuring, renegotiating or refinancing its extensive Chinese project finance debt, and Chinese companies are playing hardball, according to new research, CNBC reported. Southern Africa's third-largest economy is under pressure from an impending breakdown of its power supply and its inability to pay for electricity imports, and is staring down the barrel of further defaults on construction project financing and bond payments.

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A port operator in northeastern China once at the center of U.N. sanctions on North Korea is finding itself in another storm, Bloomberg News reported. Dandong Port Group Co. has regained attention after a controversial court ruling in favor of a state-led debt overhaul that forces steep losses on creditors and drew shareholders’ complaints about an opaque bankruptcy process. The court verdict also runs counter to an unprecedented roadmap that Beijing has just laid out to restore investor confidence via fair handling of bond defaults.

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China’s offshore corporate bond defaults rose to $3.6 billion in 2019, up from $3.3 billion the year before, according to data compiled by Bloomberg. Tewoo’s dollar bonds were restructured with some investors agreeing to be paid just 37 to 67 cents on the dollar, depending on the maturity of the debt, Bloomberg News reported. China Minsheng Investment Group’s $300 million bond was paid by a Chinese bank guarantor. The company unveiled a plan to repay its $500 million note in October.

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Local government shell companies in China bought into struggling privately run listed firms for the first time last year, veering from their typical remit of financing infrastructure projects to pump over $2 billion into cash-strapped businesses, Reuters reported. Local government financing vehicles (LGFVs) acquired controlling or near-dominant stakes in 11 China-listed firms, showed Reuters calculations based on stock exchange filings. They also bought into a handful of small, capital-starved banks.

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China’s record boom in debt issuance abroad in recent years has left a sour after-taste for bondholders: missed payments on billions of dollars worth of securities. In what’s now become a new normal for the $815 billion-plus Chinese offshore-debt market, at least seven borrowers defaulted in 2019, Bloomberg News reported. About $3.6 billion of bonds went into default last year, up from $3.3 billion the year before, according to data compiled by Bloomberg. The 2019 tally spanned a state-owned commodity trader to a onetime Coca-Cola Co. acquisition target.

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When China’s bond issuers run into trouble, investors face an increasingly tough task in extracting any returns, the Financial Times reported. Bond defaults across the world’s second-biggest economy are rising, with more borrowers failing either to repay creditors’ initial investments, or make regular interest payments. Typically, some investors can find a way to hold on to so-called distressed debt and recover scraps of cash. Specialist investors also buy this debt on the cheap, in what can be a lucrative if risky strategy. Now, though, returns are shrinking.

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