Admittedly it doesn’t look that good when tiny little Cyprus could be the straw that breaks the barn door after the twain don’t meet. But fear not, comrades! For China shall pull us all out of the dumpster with her enormous currency reserves:
For the first time, a mainland Chinese company has defaulted on its bonds. SunTech Power Holdings has been clinging on by its teeth but after failing to repay $541mm of notes due on March 15th – and following four consecutive quarters of losses through the first quarter of 2012 and since then having failed to report quarterly earnings – owed to Chinese domestic lenders, the firm is restructuring. As Bloomberg reports, Chinese solar companies are struggling after taking on debt to expand supply, leading to a glut that forced down prices and squeezed profits – and most notably were unable to renegotiate its liabilities and obtain “additional flexibility” from creditors. This is highly unusual and perhaps is the beginning of a trend for Chinese firms. We already know the little discussed but gargantuan size of China’s corporate bond market (which dwarves the US relative to GDP) as the mis-allocated credit tsunami of the last few years begins to hit its lending limit – just as Chinese corporate leverage is surging.
Um… OK, so China might be bubble about to pop, too.
I’m starting to wonder if anybody is going to make it out of 2013 alive.