Onshore ChinaCo bankruptcies will continue to
prioritise social stability and local interests over more
esoteric financial concerns such as capital structures,
according to a report by Fitch Ratings.
Defaults by Chinese companies have been resolved
through notably different routes over the past few years. FerroChina’s restructure in 2009
reassured offshore creditors, while Suntech Power’s 2013 default and
subsequent onshore restructuring left foreign investors
The 2007 bankruptcy law requires courts to consider
local government interests ahead of creditors. But
it’s not only offshore creditors who are affected
by the bankruptcy regime’s focus on stability.
According to the Fitch report, banks and trade
creditors are prone to making the greatest compromises
– even if they’re usually among the
largest common-claim creditors.
Instead local government interests are...