Chinese companies can now use onshore assets to
guarantee bonds as long as proceeds will be used offshore. But
credit enhancement structures such as keepwell deeds and EIPUs
will develop as long as issuers plan to remit cash onshore.
Real estate developer Greenland Hong Kong sold the first bonds with onshore
guarantees under the State Administration of Foreign
Exchange’s (Safe) new rules in June.
But few guaranteed deals have followed due to a
requirement that all proceeds of guaranteed bonds be used
offshore. Instead issuers have preferred older credit
enhancement structures such as keepwell deeds and standby
letters of credit (SBLC).
Panelists speaking at the IFLR Asia Capital Markets Forum
last Thursday agreed that would likely continue: "Our view is
that keepwell deeds...