The bankruptcy of a powerful state conglomerate has threatened to shake up about $100bn of debt issued by Chinese companies in a development that is being closely watched by investors in the country’s dollar bond markets.
Administrators in the restructuring of Peking University Founder Group, a state-backed technology conglomerate linked to China’s top university, have said they will not recognise about $1.7bn in so-called keepwell deeds that back its debt.
Keepwell deeds are letters of support that offer foreign investors some level of assurance that parent companies in China will make good on US dollar bonds sold by offshore subsidiaries. They were introduced in 2012 as a way of making foreign investors more comfortable with China’s dollar bond market.