A $2.5 Billion Default Shows China’s Lack of Mercy for Firms
- Chipmaker Unigroup says it can’t pay dollar bonds due Thursday
- Beijing seeking to end implicit guarantee behind state firms
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China will almost certainly let a high-flying chipmaker default on $2.5 billion worth of dollar debt, the strongest signal yet that foreign investors shouldn’t count on Beijing to bail them out.
Tsinghua Unigroup Co. said it won’t be able to repay the principal on a $450 million dollar bond due Thursday, which would trigger cross defaults on a further $2 billion of debt. This would be the company’s first dollar bond repayment failure and came after it defaulted on a 1.3 billion yuan ($199 million) local bond last month.