Henan Sets Up $4.6 Billion Fund to Address Local Firms’ Debt Risks

What’s new: Twenty-four companies backed by the provincial government of Central China’s Henan plan to jointly set up a 30 billion yuan ($4.6 billion) credit guarantee fund to assist local enterprises in dealing with debt risks, a Henan government official told Caixin.

The fund, which was registered Tuesday with 4 billion yuan of registered capital, will raise 5 billion yuan in the first phase.

Henan government-controlled Zhongyuan Yuzi Investment Holding Group led the investment with a 25% stake. Henan Energy and Chemical Industry Group Co. Ltd., parent of debt-ridden Yongcheng Coal and Electricity Holding Group Co. Ltd., also took part in the fund with a 1.25% holding, business registration records showed.

Why it matters: The establishment of the credit guarantee fund signaled the Henan government’s efforts to help local companies weather debt risks following a series of bond defaults last year.

One of the highest-profile defaults was Yongcheng Coal’s surprise failure to repay 1 billion yuan of bonds in November, shaking investors’ confidence in state companies and setting off a chain reaction that spread across the market.

Several provinces have made similar moves to set up government-backed funds to offer credit guarantees to support local companies in debt restructuring.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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