China Private Bond Faces Stress as LGFV Says No Pledge
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China’s private bond market is facing increased scrutiny after a local-government financing vehicle in the eastern province of Jiangsu said it has no obligation to guarantee notes sold by a manufacturer.
Dongfei Mazuoli Textile Machinery Co., based in the city of Dongtai, can’t pay principal and interest on the securities as of Jan. 25, according to a report today on Tencent Holdings Ltd.’s QQ.com. The LGFV had signed a contract with the manufacturer in 2012 to guarantee its bond credit ratings, but doesn’t guarantee the note payments themselves, according to a statement from the financing unit dated Jan. 26.