China

China was supposed to be the loser after Moody's Investors Service lowered its rating on Chinese government debt for the first time since 1989, a Bloomberg View reported. The May 24 downgrade to A1 from Aa3 was widely reported as an ominous turn for the world's second-largest economy, whose credit was said to be deteriorating amid borrowing problems and slower growth.

Beijing may currently favour megamergers when it comes to reform of state-owned enterprises, but at least one central bank adviser is suggesting a different approach to dealing with China’s lossmaking zombie companies, the Financial Times reported. In a column published in the Communist party mouthpiece People’s Daily on Thursday, Huang Yiping, a member of the People’s Bank of China monetary policy committee, recommended the creation of a government fund to aid employees who lose their jobs when zombie companies are shuttered.

Swissport is looking to switch up its bonds to avoid being bumped into a default after being bought by China’s HNA Group last year, in a sign of the growing scrutiny on aggressive Chinese acquisition techniques, the Financial Times reported. China’s HNA Group completed its acquisition of Swissport in early 2016, raising debt on its own account to finance the deal, along with high-yield bonds and leveraged loans under Swissport’s name.

China's Jiangsu Shagang Co Ltd said on Monday it is expected to be the biggest shareholder of debt-strapped Dongbei Special Steel Group after a bankruptcy restructuring process, Reuters reported. Owned by the Liaoning provincial government in the country's "rustbelt" northeast, Dongbei entered into the bankruptcy restructuring process in October aimed at recovering a reported $10 billion in debt, and said it faces "uncertainties" about paying interest on medium-term notes in April.

Cosco Shipping Holdings Co. offered $6.3 billion to acquire the container carrier controlled by former Hong Kong Chief Executive Tung Chee-hwa’s family in a deal that would catapult the mainland Chinese group into world’s third-largest shipping line, Bloomberg News reported. State-owned Cosco will pay shareholders of Orient Overseas International Ltd., Hong Kong’s No. 1 box mover, HK$78.67 a share in cash, a 31 percent premium over the stock’s last closing price.

Just as global investors get a new channel to access China’s $9.8 trillion onshore bond market, it’s starting to look like one that they might recognize. Gone are the days when China’s corporate debt was all pretty much priced the same, with an implicit government backstop giving buyers little reason to demand higher returns from some borrowers over others, Bloomberg News reported. Things started changing in 2014, when the Communist Party leadership with little warning began to allow defaults.

China’s banking regulator, which has asked local lenders to provide loan information on the country’s top deal-making companies, is examining examples of acquisitions gone awry by those firms to assess potential risks to the financial sector, people familiar with the matter said.

China may finally be ready to cut the cord when it comes to the country’s troubled local government financing vehicles, Bloomberg News reported. Beijing’s deleveraging drive has seen rules impacting LGFV debt refinancing tightened, spurring a slump in issuance by the vehicles, which owe about 5.6 trillion yuan ($818 billion) to bondholders and are seen by some as the poster children for China’s post-financial crisis debt woes.

An outsized $6.6bn bond deal by Evergrande, the Chinese developer, risks raising borrowing costs in Asia’s booming bond markets, analysts have warned, following a rare first-day price fall that left buyers of the deal nursing losses of $250m, the Financial Times reported. Asian companies have tapped international markets at a record pace this year, raising $128bn in US dollar-denominated bonds — almost double the amount at this point last year, according to ANZ.

China’s leverage crackdown is forcing local companies to confront their addiction to short-term bond sales that they use to roll over debt, Bloomberg News reported. The shock therapy is worsening the outlook for corporate defaults in the second half of this year after borrowing costs jumped to a two-year high. With yields surging, Chinese non-banking firms sold 131 billion yuan ($19.3 billion) of bonds with a maturity of one year or less in May, the least since January 2014 and less than half of the same month last year, according to data compiled by Bloomberg.