China Builder Default Shakes Faith in $72 Billion Bond Enhancers
- Some $11.5 billion of bonds are sold with keepwell deed in ’16
- Legal validity of keepwell deeds is being tested: Nomura
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The faith that international investors have put in some credit sweeteners on Chinese debt is being tested with the latest default from one of the nation’s builders.
China City Construction International Co., whose recent shareholder change triggered early redemption of its debt, failed to make full payment due June 20 on its 5.35 percent 2.5 billion yuan ($377 million) Dim Sum notes with an original 2017 maturity, people familiar with the matter said last month. Its parent China City Construction Holding Group Co. provided a so-called keepwell deed, which is a commitment to maintain the issuer’s solvency while stopping short of guaranteeing payments.