China Junk Bond Arranger Predicts More Chapter 15 Bankruptcies

A top arranger for Chinese junk dollar bonds says that a type of filing under the US bankruptcy code will play an important role for China’s distressed developers to restructure debt, buying them time to pay back creditors until markets recover, Bloomberg news reported. About 10 Chinese real estate companies could use so-called schemes of arrangement to restructure debt in a holistic fashion this year, Chen Yi, head of global capital markets at Haitong International Securities Group Ltd., said in an interview. As part of the process they could use Chapter 15 filings to bind the terms in the US, preventing creditors from suing them there. Chen sees more companies turning to the procedure as distressed debt piles up amid a broader crisis in China’s property sector. At least $736 billion owed to creditors may be at risk of restructuring or a haircut, Bloomberg Intelligence calculates. For banks and brokerages in Hong Kong, debt restructuring revenue has become increasingly important, as they grapple with a slump in underwriting businesses amid a bond issuance drought. Read more.