China Firms Have Found a Way to Cut Debt, at Least on Paper
- Perpetual bonds can be listed as equity on balance sheets
- Issuance has surged to a record amid the deleveraging drive
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Under pressure to trim borrowings, China’s companies have found a way to reduce their lofty debt burdens -- even if some of the risk remains.
Sales of perpetual notes -- long-dated securities that can be listed as equity rather than debt on balance sheets given that in theory they could never mature -- have soared to a record this year as Beijing zeros in on leverage and the threat it poses to the financial system. The bonds are so popular that issuance by non-bank firms has jumped to the equivalent of 433 billion yuan ($65 billion), more than seven times sales by companies in the U.S.