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China factor hampers sovereign workouts
People & Markets Venezuela and others uncertain how to confront major creditorBY CHRISTOPHER SPINK(IGHLYûINDEBTEDûSOVEREIGNSûWITHû
CHINAûASûAûSIGNIlCANTûCREDITORû
HAVEûLITTLEûIDEAûHOWûTOûAPPROACHû
THEû!SIANûSUPERPOWERûABOUTû
RESTRUCTURINGûTHOSEûDEBTS
!DVISERSûSPECIALISINGûINû
SOVEREIGNûDEBTûWORKOUTSûTOLDû)&2û
THATûTHEûQUESTIONûHASûBEENû
SKIRTEDûINûRESTRUCTURINGSûWHEREû
#HINAûWASûOWEDûSMALLûAMOUNTSû
OFûDEBTûANDûTHEREFOREûTHEREûISû
LITTLEûREALûPRECEDENTûABOUTûHOWû
TOûDEALûWITHûSITUATIONSûWHEREû
#HINAûISûAûSIGNIlCANTûCREDITOR
-AJORû#HINESEûINVOLVEMENTûISû
THEREFOREûLIKELYûTOûDELAYûANYû
WORKOUTûDEALSûWITHûBONDHOLDERSû
ANDûOTHERûPRIVATEûSECTORûLENDERS
"OTHûSOVEREIGNSûTHATûSTARTEDû
RElNANCINGûTALKSûWITHûBONDHOLDERSû
DURINGûTHEûLASTûQUARTERûOFû ûTHEû
REPUBLIC OF CONGOûANDûVENEZUELA, owe
SUMSûTOû#HINAûTHATûDWARFûTHEûTOTALû
DUEûTOûOTHERûLENDERS
h%VERYONEûINCLUDINGûTHEû)-&û
ISûGRAPPLINGûWITHûHOWûTOûDEALûWITHû#HINAûREGARDINGû6ENEZUELAû
4HEYûAREûAûBIGûCREDITORûBUTûTHEREû
ISûAûLACKûOFûTRANSPARENCYûABOUTû
THEIRûEXACTûPOSITION vûSAIDûONEû
SOVEREIGNûRESTRUCTURINGûADVISER"EFOREû#HINAûBECAMEûAûMAJORû
LENDERûTOûEMERGINGûMARKETû
COUNTRIES ûBILATERALûLENDERSûUSEDû
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OWNEDûLENDERSûDOûNOTûPUBLISHû
THEûRATESûANDûTERMSûOFûTHEIRû
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NOTûCARRIEDûOUTûAûFULLûREPORTûONû6ENEZUELASûlNANCESûSINCEû û
MAKINGûITûHARDûTOûASSESSûTHEû
COUNTRYSûPREDICAMENT
)NûTHEûLASTûTWOûMAJORû
SOVEREIGNûRESTRUCTURINGS ûGREECE
ANDûUKRAINE û#HINESEûDEBTSûWEREû
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EXCHANGEûOFFERûTHATûTARGETEDû
õBNûOFûDEBTû"UTûINû5KRAINE û
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.ONETHELESS ûWHENûTHEû
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SOLVINGûWHATûISûDEVELOPINGûINTOûAû
MAJORûHUMANITARIANûCRISIS
h)TûISûHIGHLYûLIKELYûTHATûINû
circumstances where Chinese
CLAIMSûAREûAûSIGNIlCANTûPARTûOFû
TOTALûEXTERNALûDEBT ûBONDHOLDERSû
ANDûPERHAPSûOTHERûCREDITORSûWILLû
INSISTûTHATû#HINAûBEûAûPARTûOFûTHEû
SOLUTION vûSAIDû-ARKû7ALKER û
WHOûADVISEDû'REECEûONûITSû
RESTRUCTURINGûWHENûATû,AZARDh(OWûTHISûWILLûPLAYûOUTûINû
PRACTICEûANDûTHEûDYNAMICSûOFû
NEGOTIATIONSûREMAINûTOûBEûSEEN vû
SAIDû7ALKER ûNOWûAûMANAGINGû
DIRECTORûATû-ILLSTEINûû#OCHANGING TERMS
)NûSMALLERûRESTRUCTURINGS û
PROACTIVEûDEBTORSûHAVEûFOUNDûTHEû
#HINESEûWILLINGûTOûCHANGEûTHEû
TERMSûOFûTHEIRûLOANS ûGENEROUSLYû
EXTENDINGûMATURITIESûFORûEXAMPLEû
%VENû6ENEZUELAûHASûBEENûGRANTEDû
RELIEF ûWITHûREPORTSûSAYINGûITûHASû
BEENûALLOWEDûTOûPROVIDEûOILûINûLIEUû
OFûPRINCIPALûONûSOMEûOFûITSûLOANS
"UTûITûISûUNCLEARûHOWû#HINAû
WOULDûREACTûIFûAûCOUNTRYûGOTûINTOû
MOREûSEVEREûDIFlCULTIESûANDû
FOUNDûITSELFûUNABLEûORûUNWILLINGû
TOûPAYûANDûSIMPLYûDEFAULTED
h#HINAûISûACCOMMODATINGûANDû
WILLINGûTOûOFFERûNEWûTERMSûSUCHû
ASûLONGERûMATURITIESûBUTûIFûAû
DEBTORûCHOOSESûNOTûTOûPAY ûTHENû
ITSûUNCLEARûHOWû#HINAûWILLû
REACT vûSAIDûAûSECONDûSOVEREIGNû
RESTRUCTURINGûADVISERUK banks bear brunt of Carillion collapse
Loans Company had £1.6bn of debt facilities when it was pushed into liquidationBY SANDRINE BRADLEY&IVEû5+ûBANKSûAREûFACINGûHEAVYû
LOSSESûONûLOANSûTOûCARILLION, after
THEû"RITISHûGOVERNMENTSûREFUSALû
TOûSUPPORTûTHEûCOMPANYûPUSHEDû
THEû5+ûCONSTRUCTIONûANDûSERVICESû
GROUPûINTOûLIQUIDATIONûONû
-ONDAY
Royal Bank of Scotland, HSBC,
Santander, Lloyds ANDûBarclays are
AMONGûTHEûMOSTûHEAVILYûEXPOSEDû
AFTERûPROVIDINGûaMûOFû
EMERGENCYûLOANSûINû3EPTEMBERû
ûANDûAREûALSOûLENDERSûONûAû
aMûREVOLVINGûCREDITûFACILITY
4HOSEûTWOûLOANSûMAKEûUPûTHEû
BULKûOFû#ARILLIONSûaBNûOFû
COMMITTEDûDEBTûFACILITIESû4HEREû
ISûALSOûaMûOFûPRIVATEû
PLACEMENTSûAROUNDûaMûOFû
CONVERTIBLEûBONDSûTHATûMATUREû
INûûAûaMû3CHULDSCHEINû
LOANûARRANGEDûBYû"AYERN,"ûANDû
(3"#ûINû*ANUARYûûTHATûMATURESûINû ûûANDûû
ANDûaMûOFûBILATERALûLOANS
h4HESEû;lVE=ûBANKSûHAVEû
MASSIVEûEXPOSUREûTOû#ARILLIONû
4HEYûFACEûHIGHûPROVISIONSûINûTHEû
NEXTûQUARTER vûAûRESTRUCTURINGû
ADVISERûSAID
"ARCLAYSûHASûFURTHERûEXPOSUREû
AFTERûPROVIDINGûONEûOFûTWOû
BILATERALûLOANSûTOTALLINGûaMû
WITHû'ERMANYSû(ELABAû"ANK
3IXûBANKS ûINCLUDINGû2"3 û
(3"# û3ANTANDERûANDû,LOYDS û
ALSOûPROVIDEDûANOTHERûaMûOFû
EARLYûPREPAYMENTûFACILITIESûTOû
#ARILLIONSûOPERATINGûCOMPANY ûAû
BANKINGûSOURCEûSAID
4HESEûFACILITIESûALLOWEDûTHEû
BANKSûTOûPAYûSUPPLIERSûDIRECTLYû
ANDûTHENûGAVEû#ARILLIONûûDAYSû
TOûREPAYûLENDERS
h;4HEûBANKS=ûHAVEûNOWûLOSTû
THATûMONEYûINûALLûPROBABILITY vû
THEûBANKINGûSOURCEûSAID
!TûTHEûTIMEûOFûITSûCOLLAPSE û#ARILLIONûHADûUSEDûaMûOFûTHEû
aMûEMERGENCYûLOANSûTHATû
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4HEûEMERGENCYûLOANSû
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SECUREDûREVOLVINGûFACILITYûTHATû
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CREDIT ûWHICHûWASûSIGNEDûINû
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PARTICIPANT
3OMEûBANKSûSUBSEQUENTLYû
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INTOûSYNTHETICû#,/ûVEHICLES û
SOMEûOFûWHICHûWEREûSOLDûTOû
FUNDSDEADLOCKED TALKS
4HEûlVEû5+ûBANKSûHADûBEENûINû
LAST
MINUTEûTALKSûTOûGIVEû
#ARILLIONûAûFURTHERû
aM
aMûOFûSHORT
TERMû
LOANSûTOûFUNDûTHEûCOMPANYûWHILEû
AûDEBTûRESTRUCTURINGûPLANûWASû
lNALISEDûANDûIMPLEMENTED ûTWOû
RESTRUCTURINGûADVISERSûSAID
4HEûSHORT
TERMûLOANSûWOULDû
HAVEûBEENûRElNANCEDûBYûAû
aMûCASHûINJECTIONûASûPARTûOFûAû
DEBTûRESTRUCTURINGûAGREEMENTû
THATûWOULDûHAVEûCONVERTEDûALLûOFû“Everyone including
the IMF is grappling
with how to deal
with China regarding
Venezuela”