Last week, Cloud Live Technology Group Co. became the first Chinese company to fail to repay its onshore bonds.
The lack of support from the Chinese Communist Party is surprising. In the past, authorities would typically step in to provide last-minute funding or debt restructuring to avoid a default.
But no one has stepped in for Cloud Live, which could signal a change in official policy to reform the Chinese bond market, in an effort to deleverage corporations and rein in excessive risk-taking by investors.
If true, more onshore defaults should follow, which would increase yields significantly in the Asian junk bond market.
Cloud Live said it only raised 161.4 million yuan ($26 million), or 240.6 million yuan short of the amount needed to repay debt totaling more than 400 million yuan, according to a regulatory filing in Shenzhen, where the company’s stock is listed. The payment was due on April 7.
