What’s new: A unit of China Oceanwide Holdings Group Co. (000046.SZ) failed to repay $280 million of offshore bonds in the troubled conglomerate’s ongoing crisis after years of overseas acquisitions.
The company, backed by property tycoon Lu Zhiqiang, will exchange $146 million of notes for the same amount of bonds, Oceanwide said. Payment of principal and interest on the remaining $134 million of bonds will be postponed until Aug. 23, the company said in a statement.
The $280 million of bonds were issued in May 2019 by a British Virgin Islands-incorporated subsidiary at an interest rate of 14.5% to repay domestic and overseas debt. The parent company provided a cross-border guarantee for the bonds, according to publicly available information.
It’s questionable why some investors are willing to swap the defaulted bonds for the newly issued debt unless there is another privately reached agreement, multiple bond market participants said.
The background: Last month, Oceanwide Holdings scrapped a deal reached in 2016 to take over U.S. insurance company Genworth Financial Inc. for $2.7 billion.
The deal was supposed to provide the Chinese company a platform for further global expansion. It was just one of the ambitious overseas acquisitions, ranging from film studios to trophy hotel properties, announced that year by Chinese companies.
As the deal dragged on, Oceanwide ran into a crackdown by the Chinese government on foreign acquisitions of highly indebted conglomerates. It has also experienced its own financial difficulties.
Oceanwide and its biggest shareholder together have nearly 21 billion yuan ($3.27 billion) of debt due in 2021. Several credit rating companies have also downgraded the company and its biggest shareholder.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)
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