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China Issues New Bond Rules to Help Struggling Companies

The move is aimed at helping companies better manage their debts and protect investors’ interests, the National Association of Financial Market Institutional Investors said


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James Wang of UBS said another avenue where a depreciating yuan could lower stock value is via unhedged foreign debt on the balance sheet. File photo: AFP.

 

China plans to help companies reduce default risks by issuing new bond rules that allow them to sell new debt instruments in the interbank market to replace previously issued bonds.

The move is aimed at helping companies better manage their debts and protect investors’ interests, the National Association of Financial Market Institutional Investors said in a statement late on Thursday.

The group also published rules regulating the disposal of defaulted bonds.

Chinese companies, especially smaller, private entities, are struggling in an economy hit by the country’s biggest coronavirus outbreaks in more than two years.

Bond replacement, which does not involve cash, could help companies avoid default on maturing bonds, and skips the process of debt payment compared with traditional bond refinancing.

Companies seeking bond replacement should solicit approval from bondholders, according to the new bond rules.

 

  • Reuters, with additional editing by George Russell

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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