Banking

Administrator for China's PUFG rejects keepwell deed for $300 mln bond -Redd

Credit: REUTERS/THOMAS WHITE

Troubled Peking University Founder Group Corp's (PUFG) administrator is not recognising the keepwell deed the Chinese conglomerate provided for a $300 million dollar bond issued by Nuoxi Capital, financial intelligence provider Redd reported.

SHANGHAI/HONG KONG, Aug 23 (Reuters) - Troubled Peking University Founder Group Corp's (PUFG) administrator is not recognising the keepwell deed the Chinese conglomerate provided for a $300 million dollar bond issued by Nuoxi Capital, financial intelligence provider Redd reported.

Keepwell deeds are used by some Chinese companies to facilitate offshore bond sales by their subsidiaries.

The deeds are similar, according to lawyers, to "letters of support" where the issuer would be backed by an onshore company, but they stopped short of guaranteeing the debt. Some $96 billion of Chinese bonds still carry keepwell provisions, estimates ratings agency Fitch.

Bank of New York Mellon, trustee of the Nuoxi bond, sent a notice notifying bondholders about the administrator's decision on the bond that is due this year and said that it was entitled to file an objection to a Chinese court by Sept. 3, according to Redd.

State-owned PUFG did not immediately reply to an emailed request for comment on a Sunday. Bank of New York Mellon did not immediately reply to an emailed request for comment sent outside normal working hours.

Its restructuring administrator consists of China's central bank, the Ministry of Education and relevant regulators and departments of the Beijing municipal government, according to Redd.

There has previously been no precedent on enforcement of keepwell structures. The administrator's decisions could lead to a re-pricing of keepwell-backed bonds.

(Reporting by Samuel Shen and Scott Murdoch; Editing by Muralikumar Anantharaman)

((samuel.shen@thomsonreuters.com; +86 21 20830018; Reuters Messaging: samuel.shen.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Personal Finance Videos

Discussing the Benefits of Going Remote-first

May 06, 2022

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More