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A Hong Kong court ordered Unigroup to pay $483.8mn after it ruled that the company breached a keepwell agreement over a $450mn bond issued by its unit. The keepwell terms state that Unigroup has to ensure the solvency of its bond-issuing units without guaranteeing payment, which was not met. This ruling differs from the same judge’s ruling on Founder Group, that the court highlighted. Judge Jonathan Harris said that the difference was that the default on the bonds issued by Tsinghua Unigroup, “took place before Tsinghua was ordered into reorganisation on 16 July 2021” unlike that of Peking Founder Group. Some analysts noted that the ruling could revive confidence in China’s offshore credit market and that it shows how keepwells could be a source of credit enhancement. The keepwell structure is a prominent feature for many bonds in the the Chinese bond market where companies have either defaulted or are facing payment risks.
Unigroup’s 6.5% 2028s have slid 3% over the past 30 days to currently trade at distressed levels of 46.5 cents on the dollar, yielding 17.3%.
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