China Inc.'s Debt Bills Could Be Worse Than Thought in 2018
- That’s due to record amount of bonds with put options in 2018
- Puttable bonds may raise default risk at weak firms: Moody’s
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This was supposed to be the year when Chinese companies caught a break, with the amount of local bonds coming due dropping to the least since 2014. But it’s no longer looking so clear cut.
The wrinkle? So-called put options, which give noteholders the right to demand repayment even though the securities don’t mature until later years. Rising interest rates are making it more likely that investors will do just that -- using the funds to buy recently issued bonds with higher coupons. There’s a record 1.25 trillion yuan ($195.2 billion) of notes that could be put in 2018, more than three times last year, according to data compiled by Tianfeng Securities Co.