Untested China bond structure sparks market angst after default

[HONG KONG] China's dollar bond market faces a fresh test after a landmark default by a private sector champion is set to trigger the first drawdown of a letter of credit for a public Asian bond.

A failure or even a delay in payments with such a structure would be a further blow to China's bond market that's reeling from a spate of debt woes afflicting some of the country's big conglomerates. Chinese issuers have about US$7.3 billion of dollar notes outstanding that carry SBLCs, accounting for about 90 per cent of such greenback bonds issued globally, according to Bloomberg-compiled data.

China Construction Bank's media department didn't immediately reply to an email seeking comment. Calls to China Minsheng Investment's financing manager went unanswered.

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