China's watchdogs step in to avert Sinosteel bond default
Mainland regulators make rare intervention in bond market, with the company's debt holders told to redeem their notes a month later
The National Development and Reform Commission and the State-owned Assets Supervision and Administration Commission have, in a rare intervention in the bond market, pre-empted a potential default by Sinosteel.
This is the first time state regulators have intervened in a corporate credit case. In the five previous cases in the country this year, the companies were bailed out by shareholders.
"You can't get to a liberal and open market where nobody fails," said Jini Lee, a partner at law firm Ashurst. "There has got to be some controlled defaults along the way if it is to transform into a market-driven economy.
"It's a question of how that is managed - and how that doesn't trip up the whole system."
Lee previously advised the Ministry of Finance on its first offshore listed bond issue.
After a meeting with NDRC representatives on Friday, Sinosteel debt holders were first asked not to redeem the bonds and then told the redemption date would be delayed by a month to November 16.