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Podcast - Administrator for PUFG rejects keepwell arrangement claims: What does this mean for offshore creditors with keepwell deeds?

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Beech Tim
Tim Beech

Partner

Singapore

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Tsang Agnes
Agnes Tsang

Partner

Hong Kong

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Lo Cindy
Cindy Lo

Partner

Hong Kong

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Jing Viola
Viola Jing

Of Counsel

Hong Kong

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31 August 2020

The bankruptcy administrator of Peking University Founder Group Company Limited (PUFG) has decided (the Decision) to reject claims submitted by the Trustee under the keepwell deeds and deeds of equity interest purchase undertaking provided by PUFG in support of five series of bonds issued by its subsidiaries. This is the first time a bankruptcy administrator in the mainland of the People's Republic of China (the Mainland) has decided on issues relating to the validity and enforceability of keepwell arrangements. 

In this podcast, banking partner Cindy Lo, speaks with Agnes Tsang, who has extensive experience in advising issuers and underwriters on debt capital markets transactions, along with Tim Beech, head of our APAC Corporate Trust & Agency team, and Viola Jing from our APAC restructuring & recovery group. They discuss the implications of this significant decision and enforcement options for offshore creditors who find themselves in similar situations. The podcast covers the following issues:

  • The emergence of keepwell structures and their use by Chinese companies
  • A closer look at the PUFG matter based on publicly available information
  • Implications for offshore investors in bonds that benefit from keepwell deeds provided by onshore Chinese parent companies
  • Possible enforcement options available to offshore creditors
  • A closer look at the CEFC Shanghai International Group Limited (CEFC) case and how the decision currently being considered by the Shanghai Intermediate People’s Court could affect the enforcement of keepwell structures. Earlier this year, the Hong Kong Court of First Instance issued a decision on recognition of appointment of administrators of CEFC in the Mainland. This is the first application in Hong Kong made by Mainland administrators for recognition of their appointment and judicial assistance at common law.

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