Exclusive | Shanghai’s bourse asks banks, bondholders to cut debtors some slack to ensure financial stability through China’s 70th birthday
- In an August 5 meeting with creditors and bondholders, the Shanghai Stock Exchange (SSE) asked lenders to give Hawtai Motor Group until after October 1 to repay up to 1 billion yuan in owed payment
Shanghai’s stock market operator is stepping into the workout plans of corporate debtors on its bourse, aiming to calm nerves and buy more time for borrowers while the capital markets had been roiled by a deteriorating trade war and a slowing economy.
During an August 5 meeting, the Shanghai Stock Exchange (SSE) asked holders of Hawtai Motor Group’s 5 billion yuan (US$284 million), five year puttable bond issued in 2016 to extend a put deadline to after China’s National Day celebrations on October 1.
The plea was made “on behalf of the national government to ensure financial stability ahead of the 70th anniversary of the founding of the People’s Republic of China,” according to minutes of the meeting, issued by Hawtai to creditors seen by South China Morning Post. Three SSE officials confirmed that the minutes reflected the proceedings, declining to give their names.
The pain is particularly acute for borrowers in the private sector, as they often have to go without the kind of financial backing that state-owned enterprises enjoy. At a time when funding is scarce, and financial institutions are increasingly becoming risk-averse, private-sector borrowers are especially vulnerable, said the Nanjing University’s finance professor Sun Wujin.
“Competition is very fierce for safe assets, which means that the bigger state enterprises backed by the government” get most of the financial resources, Sun said. “After all, it is more difficult for the big state firms to escape from liabilities.”