Apr 22, 2019 (China Knowledge) - Debt-laden investment platform China Minsheng Investment Group (CMIG) has been hit with another cross default for USD 800 million in dollar bonds.
The default clauses were triggered on USD 300 million worth of Hong Kong-listed bonds due in 2020 and USD 500 million of Singapore-listed notes due in 2019.
Cross defaults are provision in a bond or loan agreement that places the borrower in default should it default on another obligation such that defaulting on one bond would effectively cause the borrower to default on all of its bonds covered by such clauses.
The cross defaults by CMIG were set off by earlier freezes on CMIG’s subsidiary Yida China Holdings’ assets which allowed lenders to demand immediate repayment through an early redemption clause on USD 640 million worth on loans.
CMIG which was founded in 2014, racked up its debt through its debt-fueled expansion in the past, depending heavily on short-term notes and bonds to fund its investments. While this strategy had worked in the past, tighter credit conditions last year limited the company’s ability to continue issuing new bonds and notes, forcing it into default.
To solve its current liquidity crisis, CMIG has set up a special management committee consisting of shareholder representatives, directors, supervisors and senior management.
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