Defaults hit private bonds

Business | Bloomberg 6 Sep 2019

More Chinese companies are defaulting on private bonds this year as the slowing economy weighs on weaker companies and firms seek to repay publicly traded debt first.

The nation's issuers have missed repayments on a record 31.8 billion yuan (HK$34.95 billion) of private bonds this year up to August, compared with 26.7 billion yuan for all of 2017 and 2018 combined, according to data by China Chengxin International Credit Rating, one of China's biggest rating firms.

"Private bond issuers are not obliged to make public disclosures, therefore companies may choose to repay public notes first when they are under financial stress," said Chen Su, a bond portfolio manager at Qingdao Rural Commercial Bank. Borrowers may seek to extend their private debt through secret negotiations, he said.

The outstanding amount of publicly issued bonds is about three times that of private notes.

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