Bond Defaults Reach Once-Safe Corners of Chinese Finance

A commodity trader has become China’s first state-owned enterprise to inflict losses on dollar bondholders in two decades, according to S&P Global Ratings, a new landmark in a rising wave of defaults, the Wall Street Journal reported. Chinese authorities are allowing more companies to renege on their debts, where once they would have found ways to engineer bailouts. So far defaults have mostly been concentrated in credit-starved private companies, but even some groups with state backing are now failing to repay creditors as promised. This week Tewoo Group Co., a commodity trader owned by the municipal government of the northern city of Tianjin, completed a debt swap with holders of four dollar bonds totaling $1.25 billion, according to a notice by the agent handling the deal. Investors could receive 37 cents to 66.7 cents on the dollar in cash for their bonds, or swap their holdings for new securities that paid much lower interest, according to S&P. It said that the exchange represented the first offshore default by a state-owned enterprise in 20 years. Read more. (Subscription required.)