Chinese regulator curbs asset transfers to protect bondholders (updated)

Zhongyuan Bank

29/01/2021 05:56

(Adds more details, background; tweaks headline)
    SHANGHAI, Jan 29 (Reuters) - China's interbank bond market
regulator will restrict moves by bond issuers to transfer assets
for free, it said on Friday, in an apparent effort to protect
bondholders in the aftermath of a spurt of defaults. 
    In a statement, the National Association of Financial Market
Institutional Investors (NAFMII) told bond issuers' controlling
shareholders not to dodge debt obligations through asset
transfer or transactions with related parties.
    The curbs come after several top-rated state-owned
companies, including Huachen Automotive Group Holdings Co and
Yongcheng Coal & Electricity Holding Group Co, defaulted toward
the end of 2020, sending shockwaves across China's bond market.
 urn:newsml:reuters.com:*:nL1N2IA0JK
    Just ahead of the delinquency, Huachen transferred its prize
30% stake in Hong Kong-listed Brilliance China Automotive
Holdings Ltd to a subsidiary, while Yongcheng Coal moved its
stake in Zhongyuan Bank to two government subsidiaries.
    NAFMII said on Friday that if a company conducts a free
transfer of assets, it must make timely disclosure to
bondholders. 
    In addition, if a company plans a transfer that reduces its
net assets by 10% or more, or result in change of control,
bondholder meetings must be held. 
    Following the recent spurt of defaults, Chinese regulators
have vowed to curb misconduct, reprimanding underwriters and
rating agencies, while enhancing disclosure rules.  urn:newsml:reuters.com:*:nB9N2IV004
 urn:newsml:reuters.com:*:nB9N2J802S  urn:newsml:reuters.com:*:nL1N2IU0TG
    On Thursday, China's securities regulator said it would
"optimise a market-based mechanism" to resolve bond
defaults. urn:newsml:reuters.com:*:nP8N2K0026 

 (Reporting by Samuel Shen and Andrew Galbraith; Editing by
Clarence Fernandez and Richard Pullin)
 ((samuel.shen@thomsonreuters.com;  +86 21 20830018; Reuters
Messaging: samuel.shen.thomsonreuters.com@reuters.net))