Bond investors are anticipating that Sino-Forest, the Chinese forestry group accused of fraud, will default on its $1.3bn of debt, in what would be one of the biggest tests of the Chinese bond market in recent history.
On Monday, $600m-worth of Sino-Forest bonds due in October 2017 were trading at 31 cents on the dollar, having plunged from 44 cents at the end of last week. At the same time, the company’s 2014 bonds were trading at 32 cents on the dollar, down from 55 cents.
“Previously, the bonds were trading on a yield basis, meaning the company was seen as a going concern,” said Anissa Lee, a credit analyst at Nomura. “Now, people are looking at it from a recovery perspective. There is a very high risk of default.”
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