Debt

Guest view: Fed hikes spell emerging-market strain

4 Feb 2022

Poorer indebted economies face growing difficulties as the U.S. Federal Reserve signals its readiness to raise interest rates. William Rhodes, former president of Citibank, and economist Stuart Mackintosh lay out what creditors, borrowers and the IMF can do to avert a crisis.

China’s Year of the Ox ends in equity abattoir

28 Jan 2022

Markets are lurching toward a bleak finish to the lunar year as indexes slump alongside global peers. Those who hoped mainland stocks would outperform as Beijing eases rates are cranky, but the decline accurately reflects reality for listed companies. That’s an improvement.

Beijing has shortcut to prop up real estate

28 Jan 2022

Regulators are trying to stabilise the market, but buyers are reluctant and economic stress is increasing. Sharp cuts to interest rates or easing up on property developers would sabotage deleveraging efforts. Relaxing heavy mortgage restrictions is an easier compromise.

China reluctantly gives property market a break

20 Jan 2022

Beijing will let stressed real estate developers tap escrowed pre-payments, building on surprise cuts to interest rates and fresh support for M&A. It’s an imperfect, partial solution to a worsening problem, but the tough official deleveraging stance is softening by necessity.

Central banks will give risky debt a helpful shock

13 Jan 2022

Benchmark bond yields are rising as rate-setters around the world scale back asset purchases. That will reduce the appeal of corporate debt, but a correction in credit markets is nothing to fear. A setback may lead to less hazardous terms for bondholders, and a rout is unlikely.

Sri Lanka debt pain will go from China to Wall St

11 Jan 2022

The poster child for Beijing’s “debt-trap diplomacy” is asking for easier repayment terms amid a worsening financial crisis. Defaulting on U.S. dollar bonds may be a better option. That would help Colombo kick a credit addiction as worrying as its growing dependence on China.

China’s next debt crisis will be municipal

10 Jan 2022

Local government investment vehicles owe $8 trillion, over half national GDP, and are big dollar bond issuers. Collapsing property sales and Omicron stress are squeezing them. Beijing may let some default; others might try to dump assets in a weak market. It could get ugly.

Airlines fly close to downwards debt spiral

15 Dec 2021

Top U.S. and European carriers have added $44 bln of net debt to ride out Covid-19, taking average leverage to nearly 5 times next year’s EBITDA. Raising new equity to repair balance sheets is tough. But paying it off via cash flow will leave shareholders empty-handed for years.

China’s property crisis infects top-shelf market

15 Dec 2021

Shimao Group’s shares plunged after a deal between two affiliates appeared designed to raise cash quickly. On paper, the developer is in sound health; some of its crashing bonds enjoy investment-grade ratings. If those scores aren’t credible, more volatility is on the way.

Xi’s new year’s resolutions are hard balancing act

13 Dec 2021

China's president wants to tap the brakes on tech and other crackdowns in 2022. He's also softening his energy-transition stance while pushing for more infrastructure. Yet he plans no U-turns on property or how regions raise funds. Officials will be walking a tightrope to comply.

China property debt crisis puts founders on spot

7 Dec 2021

Investors are pushing troubled developer Kaisa to avoid default and follow rival Agile’s lead by selling bonds that convert into equity. That, and other options on the table, present founder-executives with a hard choice: cede prized majority control, or risk insolvency.

China property market faces more nationalisation

6 Dec 2021

Evergrande, the country’s most indebted developer, has admitted it might formally default. With $10 bln in property bonds maturing in January alone, officials are under pressure to keep the sector from collapsing. The most expedient solution is to put more housing in state hands.

It’s a dangerous time to buy China’s property dip

3 Dec 2021

Small Chinese developer Fantasia shocked markets when it defaulted on a $206 mln bond out of the blue, despite $4 bln in cash on its balance sheet. Now creditors are pushing it toward bankruptcy. Investors eying distressed property bonds should think twice; Fantasia has company.

China property bond rejig is destined to fail

30 Nov 2021

Developer Kaisa wants holders of $400 mln in notes to extend for 18 months. They’d get no real sweetener and would be pushed behind $3.6 bln of other maturing debt. Boss Kwok Ying-shing went through a $2 bln restructuring in 2015. Now he seems on course for a $12 bln repeat.

Bigger China property risk would be Xi blinking

11 Nov 2021

Worries about real estate contagion are growing, including at the U.S. Fed. Direct foreign exposure to the sector is limited, but it could drag down trade and investment portfolios. If Beijing relaxes its hard line, however, there’s a danger it will aggravate global inflation.

China property chaos unearths insurance landmines

10 Nov 2021

The $2 bln developer Yango is scrambling to avoid default. But a 2020 share sale to backer Taikang Life puts it on the hook to pay out generous dividends. Such opaque debt-like equity deals with insurers are common in the sector. They threaten to undermine restructuring efforts.

Capital Calls: Aussie climate plan stumbles

28 Oct 2021

Concise views on global finance: The federal government won’t sign a pledge to reduce methane emissions.

Breakdown: Buy Now, Pay Later’s bill is coming due

14 Oct 2021

The instalment-lending tool is reshaping how consumers buy online and could reach $300 bln by 2024. Banks are scrambling to catch up with upstarts like Klarna and Affirm, while regulators worry about unsustainable debts. Breakingviews explains why a reckoning is on its way.

Capital Calls: NatWest’s guilty-plea logic

7 Oct 2021

Concise views on global finance: The UK lender could receive a lower money-laundering fine for accepting culpability.

Zambia chips away at China’s secret debt edifice

1 Oct 2021

The African state owes Chinese lenders $6.6 bln, twice as much as previously thought. That doesn’t change its overall debt burden, just the mix of creditors. But it alters the power balance in restructuring talks. The case for borrowers to be more transparent just got stronger.