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Thread: China Starts to Crack?

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    GRG55's Avatar
    GRG55 is offline iTulip High Commissioner, Select Premium Member, Canada and Persian Gulf
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    Default China Starts to Crack?

    Some will recall my longstanding assertion that one important element of the so-called "Chinese Miracle" was (is?) the longest and greatest misallocation of capital in human history.

    Stein's Law states "If something cannot go on forever, it will stop" (Dr. Herbert Stein, 1976).

    Too early to tell if it has actually stopped (I have my doubts), but perhaps the early signs that it "cannot go on forever". A Chinese State Owned Enterprise (SOE) is giving holders of a series of its US$ denominated offshore bonds fresh haircuts (with Chinese characteristics, LOL?). Discounts to face value of 33% to 64%. OUCH!

    https://www.nasdaq.com/articles/tewo...nds-2019-11-24


    Tewoo bondholders invited to tender at discount or exchange for TSCI bonds

    Reuters
    SINGAPORE, Nov 25 (IFR) - Holders of Tewoo Group's US dollar bonds have been invited to tender them for cash or exchange for new bonds from Tianjin State-owned Capital Investment and Management.

    Commodities trader Tewoo is a wholly owned subsidiary of the Tianjin State-owned Asset Supervision and Administration Commission, but has had difficulties servicing its debt.

    Earlier this month Tewoo appointed Tianjin State-owned Capital Investment and Management (TSCI), a finance arm of Tianjin government founded by Tianjin State-owned Assets Supervision and Administration Commission and Tianjin Bohai State-owned Assets Management, to manage its offshore debts and implement debt management measures.

    Under the proposal, holders of Tewoo's US$1.25bn offshore bonds can choose to tender them for cash at a discount to face value or exchange them at par for new bonds issued by TSCI.

    Holders can tender the US$300m 4.5% bond due on December 16 this year and receive US$667.28 per US$1,000 in principal;
    US572.78 per US$1,000 for the US$300m 4.625% bond due April 6 2020; US$530.89 per US$1,000 for the US$200m 5.5% bond due April 6 2022; and US$360 per US$1,000 for the US$450m 5.8% senior perpetual bond callable in March 2021.

    Alternatively, they can exchange the 2019s for new zero-coupon bonds issued by TSCI and due 2024; the 2020s for 0.15% bonds due 2026; the 2022s for 1.55% bonds due 2029; and the perps for 1.60% bonds due 2039...

    ...Tewoo also has US$500m 3.15% credit-enhanced bonds due on December 1 2020, but these are not included in the offer. The bonds, issued in 2017 through Tewoo Group No 4, came with a standby letter of credit from ICBC's Tianjin branch, and the company said ICBC would pay the next coupon on December 1.





    Last edited by GRG55; 11-30-19 at 04:57 PM.

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