Red Ponzi’s Ticking Debt Bomb—-Corporate Cross-Guarantees

Take, for example, tire-maker China Wanda Group which has seen the yield on its bonds due in 2021 soar almost threefold, from 8% to over 20% since end-September, thanks to having provided guarantees to iron-wire maker Shandong SNTON Group Co., one of whose units failed to repay a bank loan two months ago.

“Large cross-guarantees could set off a chain effect that could quickly spread from one firm to another,” said Clifford Kurz, a credit analyst from S&P Global Ratings in Hong Kong, who probably rues the day he was tasked with figuring out which company is linked to which other company in cross-default obligations.