A DEBT crisis at one of China’s most well known private conglomerates entered a new stage last week, with the company saying cross-default clauses had been triggered on dollar bonds worth US$800 million.

China Minsheng Investment Group Corp. (CMIG) has appointed Kirkland & Ellis as legal adviser, according to a Hong Kong stock exchange filing Thursday, which also noted that banks have set up a creditor’s committee to try to stabilize the firm.

The cross default comes after CMIG’s problems spread to its affiliate Yida China Holdings Ltd., making some of the developer’s debt immediately payable, and causing a chain reaction back to the parent company’s own securities.

CMIG spooked investors with a late bond repayment earlier this year, joining other sprawling Chinese conglomerates such as HNA Group Co. in struggling to repay debt after a spending spree.

Since its establishment in 2014, CMIG has spent more than US$4 billion on investments and amassed about US$35 billion in liabilities as of September.

“CMIG’s debt crisis will worsen as creditors will seek to freeze more assets if it defaults on onshore publicly offered notes,” said Chen Su, a bond portfolio manager at Qingdao Rural Commercial Bank Co. The problems won’t be resolved unless CMIG finds more willing investors, he said.

CMIG said Thursday that it has also reached an agreement with holders of a privately placed note to extend the payment date to Friday from Thursday.

Yida China’s credit rating was cut to CCC from CCC+ at S&P Global Ratings late Thursday, which said the company may face a liquidity crunch in the next 12 months, given the overhang of debt repayable on demand.

(SD-Agencies)