China Has More Distressed Corporate Debt Than All of EM Combined

In the span of just 11 months, China went from having no distressed dollar-denominated corporate bonds to having more than any other emerging market, Bloomberg News reported. The world’s second-biggest economy has 15 bonds whose option-adjusted spreads over U.S. Treasuries were above 1,000 basis points as of Nov. 6, according to a Bloomberg Barclays index. That’s more than all the other nations combined. An ongoing trade war and slower economic growth after years of breakneck expansion are straining the nation’s highly-leveraged corporate sector. Property developers in particular are facing surging borrowing costs as refinancing pressures intensify amid the government’s effort to rein in real estate prices. At least four property-related firms defaulted on debt this year, and investors are bracing for more. China Evergrande Group, the country’s second largest builder by sales, priced a dollar bond at 13.75 percent last week, the highest interest rate it has ever paid on a dollar issue, according to Bloomberg data. Read more

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