A unit of Guosen Securities, China’s eighth-largest investment bank said on Thursday it had not neared default on its offshore debt after uncertainty over payments raised questions over so-called “keepwell” deals, or promises by mainland groups to support the borrowing of their offshore units.
The bonds’ trustee, Bank of New York Mellon, said late on Thursday it had received a clarification notice from Guosen that sought to “correct statements set out in earlier communications”. The notice in effect amended an early note from BNY Mellon that warned bondholders of an “event of default”.
While no payments had yet been missed, the technical phrase sparked worries over keepwell agreements, used by mainland groups to support the borrowings of their offshore entities in dollars as well as renminbi, before rule changes in 2014 allowed them to issue legal guarantees.