Two Chinese companies failed to repay bonds worth a combined half a billion dollars on Monday, underscoring rising debt risks in the highly leveraged nation as the economy slows, Bloomberg News reported. Peking University Founder Group was unable to secure sufficient funding to repay a 270-day, 2 billion yuan ($285 million) bond, according to a company filing to the National Interbank Funding Center. Tunghsu Optoelectronic Technology Co. failed to deliver repayment on both interest and principal on a 1.7 billion yuan bond, according to Shanghai Clearing House.
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It turns out trade wars are not just painful but also very loud, so much so that they can drown out some fairly consequential things, Bloomberg News reported. One of those is debt. And in the Chinese context, we should note that there is a lot of it and it has increased very quickly. Bloomberg Economics estimates that the country’s total debt ballooned about five-fold in the decade through 2018 to roughly $35 trillion.
The number of Chinese companies failing to make payments will continue to rise in the year ahead as economic growth sputters and the government attempts to rein in support to indebted companies, according to Moody’s Investors Service, Bloomberg News reported. The credit ratings company expects 40-50 new defaults in 2020, up from 35 this year, according to Ivan Chung, head of greater China credit research and analysis at Moody’s. He expects the total value of defaults would be below 200 billion yuan ($28 billion), representing less than 1% of the size of China’s bond market.
Troubled banks in China are struggling to raise funds as concerns over the health of the financial system grow and confidence in state-led bailouts falters. China’s banking system is facing its greatest challenge in nearly 20 years after years of runaway growth and mounting bad debt levels, which have topped 40 per cent of loans at some small lenders, the Financial Times reported.
A major Chinese commodity trader looks poised to become the most high-profile state-owned enterprise to default in the dollar bond market in over two decades, Bloomberg News reported. In a fresh sign that Beijing is more willing to allow failures in the politically sensitive SOE sector, Tewoo Group has offered an unprecedented debt restructuring plan that entails deep losses for investors or a swap for new bonds with significantly lower returns. Tianjin-based Tewoo Group Co.
A troubled Chinese state-own firm is giving bondholders a stark choice on $1.25 billion of dollar bonds: take a haircut of as much as 64% or accept delayed repayment with sharply reduced coupons, a BloombergQuint reported. Tewoo Group Corp., which is owned by the Tianjin local government, proposed the exchange/tender offer on Friday on three dollar bonds due to mature over the next three years as well as a perpetual note. The news came after a bank paid a coupon on a $500 million bond last week which was backed by a standby letter of credit.
Chinese private equity group Hony Capital plans to tighten its grip on PizzaExpress with an agreement to buy an additional £80m of its bonds at a steep discount, giving it more control over any restructuring of the UK restaurant chain’s debts, the Financial Times reported. The move, which was opposed by some debt holders over concerns they could be marginalised, makes a restructuring more likely, analysts said. PizzaExpress, which was bought by Hony in a £900m leveraged buyout in 2014, revealed a debt pile of £1.1bn in its annual report in April.
A subsidiary of China’s largest construction group has suspended work on one of the nation’s tallest skyscrapers after the developer became the latest in a string of companies to default on a payment, the Financial Times reported. The default highlights the growing challenges faced by China’s construction groups as the slowing economy trims credit supply, putting the once runaway mega-tower building boom under stress.
In a related story, Bloomberg News reported that Chinese technology conglomerate Tunghsu Group Co. is looking to extend its bond payment deadlines after failing to settle its obligations this week, in the latest sign that the nation’s private-sector firms are struggling to ease their debt load amid an economic slowdown. Beijing-based Tunghsu Group mainly produces photoelectric display components, but also operates new energy, real estate and other businesses. Its three listed companies -- Tunghsu Optoelectronic Technology Co., Tunghsu Azure Renewable Energy Co.
An attempt by lenders to get PizzaExpress Ltd. to open talks on ways to prop up the troubled restaurant chain has failed to bring its Chinese owner to the negotiating table, Bloomberg News reported. The investors, holding 70% of PizzaExpress’s most senior bonds, sent a letter to the company a week ago pledging to provide new funds, according to people familiar with the matter.