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China’s $1.7 trillion hangover

China’s $1.7 trillion hangover

Up to 40% of China’s $1.7 trillion LGFV loans are at high risk of default. What’s a panicking Beijing to do?

February 2004

How Culs might ease the pain

by Peter Koh


Using convertible unsecured loan stock (Culs) along with cash could help different types of deals break the impasse between existing shareholders and bidders.

In an example like the first failed bid for Debenhams in July by Blackstone, Goldman Sachs and Permira, where a fairly full price was offered but institutional shareholders were unhappy with the decision to take the company private in principle, those shareholders could elect to receive 20% to 30% of the bid in the form of carried interest instruments.

Where a target company's share price has fallen so low that institutional shareholders are unwilling to sell despite a nominally high premium, they could elect to take a much...


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