News that a large private company, Ruyi Group, based in Shandong province, was unable to repay a Rmb1bn bond followed news in November that large state-owned companies such as Brilliance and Yongcheng Coal Power had defaulted on their debts.
Ruyi Group, which controls sportswear brands such as Lycra and The UK’s GIEVES& HAWKES, has accumulated more than $4bn in total debt.
According to the Financial Times, Ruyi negotiated a three-month moratorium on annual interest payments with bondholders before it tried to secure a rescue from a local government financing vehicle in Shandong province. But local government financing vehicles (LGFVS), under intense scrutiny, did not come to their rescue and announced in June that they were pulling out of the deal.
Insiders pointed out that the ruyi group bond default event shows the risk of cross-guarantee between government-related enterprises and private enterprises. Analysis also pointed out that over the next year, ruyi Group has a large number of bonds due.
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