China’s $162 billion dealmaker debt raises alarm amid probe
Shanghai/Hong Kong: China struck deal after deal to acquire companies abroad over the last few years. Now the bill is coming due.
The nation’s top corporate dealmakers, including HNA Group Co. and Fosun International Ltd, must pay off the equivalent of at least $11.5 billion in bonds and loans by the end of 2018—a feat now complicated by government efforts to rein in their aggressive rush overseas.
That figure represents just a fraction of the total debt of 1.1 trillion yuan ($162 billion) that the Chinese companies have reported as they projected their money and influence around the world with a record number of acquisitions. The size of their obligations—and whether they will be able to shoulder them—has begun to worry global banks and investors now that Beijing has pressed companies to dial back their ambitions abroad.
“Those companies the banking regulator is checking on have very high financing demand for M&A activities,” said Xia Le, chief Asia economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. “But banks will heighten their risk control when lending to them going forward, which could increase their funding costs and hurt the pace of their expansion.”
The moves threaten to end an era of easy access to money for the firms. People familiar with the matter said last month that China Banking Regulatory Commission asked some banks to provide information on overseas loans to HNA, Fosun, Anbang Insurance Group Co. and Dalian Wanda Group Co. Yields on some bonds issued by the firms jumped. The CBRC is examining examples of acquisitions gone awry to assess potential risks to the financial sector, people familiar also said.
To be sure, the firms, which are among the biggest private-sector firms in China, are sitting on a cash pile that they can tap to meet upcoming debt deadlines. They have more than 400 billion yuan of cash and cash equivalents, according to the latest filings compiled by Bloomberg. Bloomberg