A China Borrower’s $11 Billion Debt Mountain Comes Crashing Down | Bloomberg
Author: James Alexander Michie
Currently, China receives one of the biggest breaches of corporate debt. Also, investors in Wintime Energy Co., show that the company is unable to renew the debt which is quadrupled in less than five years since the borrower obtained a record of 72.2 billion yuan ($ 10.800 million) that now cannot pay. To make it clear, so this will be the worst year for China with respect to corporate breaches.
Likewise, Wintime’s debt was quadrupled in almost five years, initially it was estimated to borrow to be able to finance one or another acquisition and possibly make an expansion to areas where finance and logistics are included, then in 2014 the Debt costs fell significantly which made it easier to acquire financing, however, this changed in 2016 when Xi Jinping started emphasizing controlling financial risks. Now Wintime is behind with 11,400 million after not having paid a local bond this month, which positions it as the biggest debtor in China so far in 2018.
It is speculated that the firm aims to collect new debts in order to be able to pay existing obligations by selling their assets in the same way.
Previously the government had suggested and encouraged the various companies to use the bonds in financing since they would adopt financial innovation depending less on the state banks, but the drawback was that local buyers had little experience in credit exploration, as well There was very little due diligence until China started allowing defaults in 2014.
On the other hand, China’s economic growth was due to debt, but now many more companies can give up debt repayment if they encounter financial weaknesses such as drastic measures taken by the authorities with regard to hidden financing, boosting rates of money market indebtedness and fortifying regulations in the asset management industry.
Take a read: https://www.bloomberg.com/news/articles/2018-07-18/a-china-borrower-s-11-billion-debt-mountain-comes-crashing-down
Source: Bloomberg News
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