A state-owned Chinese group caught up in the country’s spate of defaults owes billions of dollars to lenders, raising concerns that bond market tremors could also sweep through the banking sector, reported the Financial Times.
According to a creditor document viewed by the Financial Times, almost 70 Chinese and foreign banks, as well as trust companies, had RMB 33.5 billion ($5.1 billion) in outstanding lending to Huachen Automotive Group as of last year. The revelation comes as the country’s multi trillion-dollar debt markets have been rocked by defaults at government-backed companies.
Some creditors said they are reassessing their exposure to Huachen, whose subsidiaries include BMW’s partner in its China manufacturing joint venture, after it defaulted on a Rmb1 billion bond in October. Huachen, based in the northeastern city of Shenyang, is controlled by the Liaoning provincial government.
“We worked with Huachen because it is the biggest state-owned enterprise in Liaoning and the local government can’t afford to let it go under,” a banker at one of Huachen’s creditors told the FT.
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