The parent of the Chinese mainland’s most valuable listed company, liquor-maker Kweichou Moutai, plans to issue up to RMB 15 billion ($2.2 billion) in bonds to help another local government-owned company in debt-ridden Guizhou province repay its debts, reported Caixin.
The bond issuance illustrates how a local government can leverage a profitable state-owned enterprise (SOE) to aid a peer and, by extension, the government itself, which is in theory responsible for the debts of the companies it owns.
With a market cap of more than RMB 2 trillion, Shanghai-listed Kweichou Moutai is controlled by China Kweichow Moutai Winery Group(Moutai Group), a wholly owned subsidiary of the provincial State-owned Assets Supervision and Administration Commission (SASAC) in Guizhou province.
The Shanghai Stock Exchange has accepted the application for the bond issuance, which is pending regulatory approval, according to a prospectus filed Wednesday to the bourse.
Moutai Group, the issuer, plans to use some of the proceeds from the issuance to buy shares of Guizhou Expressway Group, a wholly owned subsidiary of the provincial SASAC, according to the prospectus. Moutai Group also plans to use some of the proceeds repay Guizhou Expressway’s debts and replenish its working capital.