Another Chinese financial institution came under investigation in relation to the bond default of state-owned Yongcheng Coal and Electricity Holding Group, reported Caixin.
The National Association of Financial Market Institutional Investors (NAFMII), China’s interbank bond market regulator, said Monday it launched a “self-disciplinary” investigation of Donghai Fund Management on suspicion that the fund manager facilitated the issuance of debt financing instruments in violation of rules and engaged in market manipulation.
Caixin learned from exclusive sources that the probe might be related to Haitong Securities’ role in Yongcheng’s structured bond issuance. Donghai’s fund accounts were used as a channel through which Haitong operated structured bond issuance for clients, several market participants told Caixin.
Yongcheng’s abrupt default on RMB 1 billion yuan ($151 million) of bonds earlier this month shed light on the company’s structured bond issuance, a shady fundraising practice in which a company buys a portion of its own offerings to inflate borrowing sizes and create a better image to attract investors