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Another domino falls. Tongshu Optoelectonic fails to pay RMB 66mn interest on a bond when it claimed to have RMB 9.5bn in cash on balance sheet at end Q3. Can’t wait to read the “here’s how SOEs ‘create’ massive cash balances which don’t exist” Caixin story.
If you’re a provincial governor right now, it’s clearly time to let your rubbish SOEs default - before it gets out of hand andBeijing calls a halt to this wave.
If you’re a credit bond investor right now, which bit of an SOE balance sheet do you trust? If none of it, borrowing costs are going to be higher for everyone.
If you’re a bank right now, time to hire lawyers as SOEs which default go into restructuring & its your loans too which will be hair-cut. And time to send friendly greetings to those governors:”Nice infrastructure plans you have there, shame if anything happened to the funding.”
If you’re a SOE bond underwriter right now, time to start saving for the fines you’ll be paying - you’re the only one with any cash.
And if you ever believed SOE debt-equity swaps were reserved for only great companies, as per official policy, not the absolute worst, its great time to DM me about a fabulous bridge project I have on special offer.
