A state-owned bad loan bank has agreed to bail out China’s first domestic bond default, in a move that could reinforce the assumption that even risky credit enjoys an implicit government guarantee.
Shanghai Chaori Solar, which in March failed to meet an interest payment on Rmb1bn worth of bonds, announced a restructuring plan yesterday under which some creditors could face haircuts of up to 80 per cent.
But holders of Chaori’s exchange-traded bonds may be repaid in full thanks to a guarantee worth Rmb880m ($143m) issued by Great Wall Asset Management, one of the four bad loan banks that the government established in the late 1990s to buy toxic assets from the big four state-owned banks.
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