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China dollar bond default tests bank guarantees for first time
By Carrie Hong and Carol Zhong
Thursday, April 25, 2019
Investor faith in Chinese dollar bonds backed by banks is about to be tested after a default by one of the country's best-known private conglomerates.
China Minsheng Investment Group Corp. said last week cross-default clauses have been triggered on dollar bonds worth $800 million. These include $300 million of debt that carries a standby letter of credit from China Construction Bank Corp. -- effectively a pledge to repay if the borrower can't.
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So far investor confidence that banks will honor such an agreement is unshaken. While CMIG's dollar bonds due in August -- which aren't backed by a letter of credit -- traded at around 58 cents on the dollar, bonds with CCB's backing due in 2020 were indicated at about 99 cents on the dollar today. ...
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