China

Refinancing pressure is mounting at China’s industrial firms following unprecedented pandemic-induced shocks to the sector and a dearth of bond issuance in the past three months, Bloomberg News reported. Offshore bond sales from high-yield energy and other industrial companies hit a two-year low in the first half of 2020, with no sales from April to June, according to Bloomberg-compiled data. It couldn’t have come at a worse time for them as $3.1 billion of bonds, or more than a quarter of their debt, need to be repaid or refinanced over the next 12 months, the data show.

An investigation into the accounting misdeeds at Luckin Coffee Inc. has concluded that the company’s chairman knew—or should have known—about the fabricated transactions that inflated the Chinese coffee chain’s sales last year, the Wall Street Journal reported. A report detailing the internal probe also said that Charles Lu, Luckin’s co-founder and chairman, didn’t fully cooperate with the investigation. The monthslong probe was conducted by a special committee of Luckin’s board with the assistance of law firm Kirkland & Ellis LLP.

The restructuring of China’s Peking University Founder Group Corp (PUFG) highlights the limitation of keepwell deeds in protecting investors, ratings agency Moody’s said on Monday, casting a cloud over a structure used in almost $100 billion worth of Chinese dollar bonds, Reuters reported. Keepwell deeds are used by some Chinese companies to facilitate offshore bond sales by their subsidiaries. State-owned Peking Founder in February confirmed its failure to repay an onshore bond had led to a cross-default on $3 billion of offshore bonds.

Strains are emerging across China’s Rmb21tn ($3tn) trust industry, which has lured millions of ordinary investors seeking more profitable — but riskier — places to park their cash, the Financial Times reported. Dozens of disgruntled Chinese investors protested this week in Chengdu, capital of the southwestern province of Sichuan, after Sichuan Trust, based in the city, said the firm would struggle to make principal and interest payments on at least Rmb13bn worth of “trust of trust” vehicles due by the end of the year.

Bank of China Ltd. is discussing ending a credit facility to Germany’s Wirecard AG, a move that would complicate the beleaguered company’s fight for survival after it was engulfed by a multi-billion-dollar accounting scandal, Bloomberg News reported. China’s fourth-largest lender may write off most of the 80 million euros ($90 million) it’s owed and not extend the credit line, said people familiar with the matter, asking not to be identified as the discussions are private.

Volvo owner Geely is set to take over an automaker battered by a prolonged sales decline exacerbated by the impact of the novel coronavirus, said three people with knowledge of the matter, in an indication of how the pandemic is stoking consolidation, Reuters reported. Zhejiang Geely Holding Group Co Ltd plans to become the top shareholder of Chongqing Lifan Holdings Ltd and inject fresh capital into China’s one-time leading motorcycle maker, said two of the people, who declined to be identified as the matter was private.

African countries may get debt relief from China more easily than private creditors amid a global push to blunt the economic impact of the coronavirus pandemic on poor nations, a Johns Hopkins University study shows, Bloomberg News reported. China has written off $3.4 billion and restructured or refinanced about $15 billion of debt in Africa over the past decade without slapping penalties or seizing assets from borrowers, it said.

NWS Holdings Ltd., a unit of one of Hong Kong’s biggest property developers New World Development Co., has applied for a license to manage distressed loans in China, according to people familiar with the matter, Bloomberg News reported. NWS has submitted the application to the China Banking and Insurance Regulatory Commission for a permit in southern Hainan province, said the people, who asked not to be identified as the matter is private.

As many Chinese companies take advantage of declining interest rates to slash borrowing costs, some debt-laden developers are doing the opposite -- raising coupons to avoid having to buy back debt, Bloomberg News reported. Developers make up almost a third of 16 bond issuers that substantially increased coupons this year when a put option allowing investors to sell their holdings back to the company came due, according to Bloomberg calculations based on public data.

China is considering using about 200 billion yuan ($28 billion) in proceeds from government bond sales to help address risks in the banking sector, according to people familiar with the matter, Bloomberg News reported. The debt will be part of the total issuance planned by the central government in 2020, and it’ll be used for measures including re-capitalization for medium- and small-sized lenders, the people said, asking not to be named as they’re not authorized to speak publicly.