The restructuring of a high-profile Chinese group with ties to Beijing has emerged as a critical legal test for foreign investors holding tens of billions of dollars in bonds issued by companies in China, reported the Financial Times.
Peking University Founder Group traces its origins back to the 1980s as a successful hardware business helmed by the late Wang Xuan, a top computer scientist at the prestigious academic institution. However, the state-backed group ran into severe debt problems after expanding into technology, healthcare, property and finance.
Today, it is the largest defaulter on dollar-denominated debt in China in nearly two decades, according to rating agency S&P, owing about $1.6 billion in US dollar notes. It has also defaulted on RMB 36.5 billion ($5.6 billion) of onshore bonds, according to data from information provider Wind.
The result of a Beijing court-ordered restructuring of the group is expected by late April. The treatment of foreign bondholders in the restructuring is being closely watched by investors that collectively have taken on $82 billion in China-issued debt backed by keepwell deeds, reported the FT.