Chinese corporate issuers are now able to guarantee
their bonds, but regulatory restraints mean that support
mechanisms remain popular according to investors active in the
Although a new guarantee regime was announced last
year, companies continue to sell bonds through offshore holding
companies supported by credit enhancement mechanisms; the new scheme requires proceeds to be used offshore.
Most issuers want to use proceeds onshore, so their
notes continue to include keepwell structures, which can be
implemented through mechanisms such as equity interest purchase
undertakings and liquidity support facilities. Others utilise standby letters of credit (SBLCs).
But investors must know...