The American Bondholders Foundation, LLC (ABF) is honored to have The Ben Barnes Group (BBG) representing the ABF and the collection of defaulted sovereigns owed by China to the many purchasers of their government issued debt which China has defaulted on around the world.  The ABF and BBG look forward to working closely together to combat and resolve this issue globally and hold China accountable for its financial obligations. [More info]
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Investor Alert
People's Republic of China Sovereign Bonds ~~Interest Payments Subject to Attachment
Recent judicial decisions enable defaulted creditors holding sovereign obligations to successfully assert pari passu doctrine to attach PRC payments to all creditors, including current and future investors in PRC sovereign bonds:

Elliott Associates, L.P., General Docket No. 2000/QR/92 (Court of Appeals of Brussels, 8th Chamber, Sept. 26, 2000)
Republic of Nicaragua v. LNC Investments and Euroclear Bank SA (Injunction issued against paying agent by Belgian Commercial Court, Sept. 8, 2003)
Red Mountain Finance, Inc. v. Democratic Republic of Congo and National Bank of Congo, Case No. CV00-0164R (C.D.Cal. May 29, 2001)
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S.Con.Res. 78
Expressing the sense of the Congress that the People's Republic of China and all Enterprises owned or controlled by the People's Republic of China should make proper disclosures with the Securities and Exchange Commission regarding the "Selective Default" status of certain bonds"--(United States Senate - April 28, 2008)
[CLICK HERE] for S.Con.Res 78
[CLICK HERE] for H.Res 1179

**J. Bianco invited to testify before the House Committee More info-->
 
 

New-->>Mr Eugene Rosengarden Joins ABF
 New-->>Dr Norman A Bailey Joins ABF
New-->>Letter to John McFall
New-->>Institutional Approval of Lawlessness
New-->>SEC Conference Brief
New-->>NASDAQ Complaint
 

Concurrent Resolution of the United States Congress condemning the wrongful actions of the government
of the People's Republic of China and expressing the Sense of the Congress to bar future issuances of
Chinese securities within the United States until such
 time as the communist Chinese government fully honors the repayment of China's defaulted full faith and credit sovereign debt.


The Great Global Credit Meltdown of 2007
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Complaint Filed with the U.S. Securities and Exchange Commission Describing Violations of the Federal Securities Laws

Amendment Alleging Fraud

Brief Amicus Curiae

Letter to Credit Rating Agencies re: Improper
Sovereign Rating Classifications and Inadequate Disclosure of Risks
New-->>Credit Rating Agencies Score Big Profits as
SEC Looks the Other Way

New-->>New Program Enables Companies to
Extinguish Debt at 70 Percent Savings.
 

Resolution of the United States Congress to Deny the Communist Chinese Government Access to the U.S. Capital Markets
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Credit Rating Agencies Score
Big Profits as SEC Looks the Other Way


Debt Relief for Companies and Governments Indebted to China
 


New Program Enables Companies to
Extinguish Debt at 70 Percent Savings
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Testimony presented at a meeting of global finance ministers and central bankers hosted by the World Bank and the International Monetary Fund Statement Relating to the Claims of U.S. Creditors Holding Defaulted Sovereign Debt of the Government of China.
Congressional Endorsement of International Offset Complaint Filed On Behalf of Default Creditors of the Government of China Alleging Misleading Sovereign Credit Ratings and Inadequate Disclosure Pertaining to the Offer, Sale and Trading of Debt Securities of the People’s Republic of China Including Violations of International Law.
Complaint to Committee of European Securities Regulators On Behalf of Defaulted Creditors of the Government of China: COMPLAINT Misleading Sovereign Credit Ratings and Inadequate Disclosure Pertaining to the Offer, Sale and Trading of Debt Securities of the People’s Republic of China: Deceptive Practices and Violations of International Law.
Complaint to US Securities and Exchange Commission On Behalf of Defaulted Creditors of the Government of China: COMPLAINT Misleading Sovereign Credit Ratings and Inadequate Disclosure Pertaining to the Offer, Sale and Trading of Debt Securities of the People’s Republic of China: Deceptive Practices and Violations of International Law
Complaint to International Organization of Securities Commissions On Behalf of Defaulted Creditors of the Government of China: COMPLAINT Misleading Sovereign Credit Ratings and Inadequate Disclosure Pertaining to the Offer, Sale and Trading of Debt Securities of the People’s Republic of China: Deceptive Practices and Violations of International Law.
Letter to Attorney General of the State of New York Initial Complaint filed in the United States on behalf of the American Bondholders Foundation.
Legal Analysis of Claims Legal Confirmation of China's Financial Obligations to U.S. Bondholders
Default by China of Full Faith and Credit Bonds: 40% of Proceeds to Benefit U. S. Government and Many American Communities
5% Reorganization Gold Loan of 1913 Bearer Bonds DEMAND FOR FAIR SETTLEMENT OF CLAIMS
Action by the United States Congress Complaint Filed On Behalf of Default Creditors of the Government of China Alleging Misleading Sovereign Credit Ratings and Inadequate Disclosure Pertaining to the Offer, Sale and Trading of Debt Securities of the People’s Republic of China Including Violations of International Law.
Filing with the U.S. Government Accountability Office Request by the United States Congress for Investigation into Complaint Filed with Division of Market Regulation of the U.S. Securities and Exchange Commission.
Enforcement of SEC Regulatory Mandate Pertaining to Nationally Recognized Statistical Rating Organizations
 
Letter to SEC Chairman Christopher Cox Complaint filed with the Division of Market Regulation on behalf of defaulted creditors of the Government of China.
Press Release Archive Chinese Government Bond Default Prompts Complaint Against International Credit Rating Agencies

People's Republic of China
Sovereign Bond Rating Research Bulletin

JUSTIFICATION FOR REVIEW OF SOVEREIGN CREDIT RATING OF THE PEOPLE’S REPUBLIC OF CHINA

ATTACHMENTS:

1. Legal Opinion Issued by Stites & Harbison PLLC Affirming Validity of U.S. Citizens’ Claims Against the People’s Republic of China Relating to Defaulted Sovereign Obligations of the Chinese Government.

2. Transcripts of Testimony Before the International Relations Committee of the United States Congress House of Representatives.

January 20, 2004.

In light of certain past defaults by the Chinese Government on sovereign debt issues and the continuing refusal of the present government of China to honor payment of defaulted external bond issues as required under international law, it is appropriate at this time to conduct a review of the sovereign rating assigned to long-term debt issued by the national government of the People's Republic of China.

Although there exist numerous defaulted Chinese Government bond issues, the obligations whichare specifically the subject of this research bulletin are those obligations issued on a global syndication basis as the "Chinese Government Five Per Cent Reorganization Gold Loan of 1913". These bearer obligations were issued denominated in British pounds sterling, in both £20 and £100 increments and were due to mature in 1960.

The Chinese Government Reorganization Gold Loan Bonds (the “Bonds") were issued as full faith and credit obligations of the Chinese Government. A substantial number of the Bonds are held by United States citizen bondholders which constitute a valid claim under existing international law (please refer to attached legal opinion issued by Stites & Harbison, PLLC).

The Bonds are presently in default. The successor government, the People's Republic of China (the “PRC"), has refused and continues to refuse to pay the claims of U.S. citizen bondholders of these obligations. The holders of the Bonds who are U.S. citizens are in the process of asserting a claim against the PRC for payment in full of the defaulted Chinese Government obligations.

The individual bondholders' claims have been consolidated under the auspices of the American Bondholders Foundation, which is pursuing payment of the defaulted securities in conjunction with the Foreign Bondholders Protective Council. The cumulative value of the defaulted Gold Loan Bonds claim being asserted against the PRC by U.S. citizens is approximately $125 billion. The American Bondholders Foundation also represents U.S. citizens who are holders of various other defaulted, U.S. dollar-denominated Chinese Government bond issues in asserting claims for payment.

ACTION

In view of the foregoing factors and for the reasons discussed below and in the attached legal memorandum, Sovereign Advisers at this time issues a Downgrade Alert for Long-Term Debt of the People's Republic of China to sub-investment grade status.

1. Refusal by the PRC to Pay Defaulted Sovereign Obligations in Contravention of International Law:

The unwillingness of the Government of the People's Republic of China to honor a legally valid claim asserted by U.S. citizens as holders of the Chinese Government Reorganization Gold Loan Bonds. The Bonds are full faith and credit obligations which under international law are legally binding upon the PRC as the successor government to the National Government of China. The position of the PRC with respect to refusal to pay holders of full faith and credit sovereign obligations is in flagrant violation of international law (see Restatement (Third) of the Foreign Relations Law of the United States, Section 712(2) and Creditors Claims in International Law, The International Lawyer, Volume 34, page 235, Spring 2000).

2. Emergence of a Significant Contingent Liability:

Emergence of a significant contingent liability in the form of potential financial impact of bondholder claims on the PRC's external payments position in the event of an eventual settlement of bondholder claims, which would likely exert a material adverse effect on the PRC's external payments position, as well as negatively affecting foreign direct investment and foreign exchange rates.

3. Impaired Ability by the PRC to Implement Monetary Policy Reforms:

The possibility that the PRC’s efforts to continue to reform the country’s financial system, in part by reducing the generation of new non-performing loans (“NPLs”), may be impaired due to increased difficulties faced by the four asset management companies charged with recovery or disposal of NPLs to repay loan purchases through the issuance of sovereign-supported debt. The pricing and marketability of new debt issues may be adversely affected due to exigencies created by virtue of pre-existing defaulted claims presently in collection. Foreign participation in Chinese financial markets may be discouraged as well, as a direct result of the PRC’s posture with respect to refusal of payment of government obligations.

In addition to the foregoing, since full faith and credit obligations of a sovereign issuer are generally held post-Brady Plan restructuring to be de facto senior to bank debt, it is appropriate at this time to assign a downgrade to trade credit of the PRC, as well as to outstanding and future debt obligations of state-owned enterprises (“SOEs”) of the PRC.1 The relevant historical fact pattern demonstrates that when the isolationist Chinese communist government (i.e., the PRC) acceded to political power over the Chinese mainland and subsequently repudiated existing external sovereign debt obligations, and then determined to re-access the international capital markets while ignoring payment claims arising from valid pre-existing obligations of the Chinese Government, the probability of future continuity of payments on present and future-issued obligations may reasonably be interpolated from the historical fact pattern as embodying a significant degree of repayment uncertainty which is not reflected in the current PRC debt rating. 1 Post-1990 Brady Plan debt restructuring as described in "Appendix A" of the Salomon Smith Barney Sovereign Credit Risk Analyst's Guide.


The historical and continuing refusal by the PRC to pay legally valid obligations of the Chinese Government, in violation of international law, represents a form of institutionalized behavior pattern of the PRC, suggesting the probability that such debt defaults presaged upon the unwillingness to pay external obligations may reasonably be expected to recur in the future.

In light of the persistent intransigence of the PRC with respect to payment of defaulted external obligations and the continued unwillingness of the Chinese Government to pay legally valid claims arising from defaulted sovereign obligations, as well as the potential financial impact arising from a contingent liability, the following existing PRC ratings are no longer appropriate:

Credit Rating Agency PRC Long-Term Foreign Currency Credit Rating

Standard & Poor’s BBB/Positive/A-3

Moody’s Investors Service A2/Stable

Fitch, Inc. A-/Positive

The posture of the Government of the People’s Republic of China with respect to its continued refusal to pay U.S. citizens’ claims arising from defaulted Chinese government debt obligations as required under conventions of international law as described herein and affirmed in the attached legal opinion is neither consistent with, nor indicative of, an investment-grade sovereign.

In light of such posture, Sovereign Advisers issues a credit watch for sovereign debt obligations of the PRC and assigns a downgrade of the PRC debt rating to sub-investment grade status. A re-determination and downgrade of the prevailing sovereign credit rating of the People’s Republic of China is further warranted by the emerging significance of this issue within the United States Government, as evidenced by the testimony presented on October 21, 2003 to the International Relations Committee of the United States Congress House of Representatives during hearings conducted on PRC abuses of the international financial system.

Transcripts of Congressional testimony may be accessed at:

http://www.foreignaffairs.house.gov/archives/108/90360,

 

Jonna Bianco, President
 American Bondholders Foundation

2840 Glasscock Road
Lewisburg, Tennessee 37091

Telephone: (931) 359-8781
Fax(931) 359-9689

 

 
Kelley Drye, LLP
John McDonald, Associate
 
Washington Harbour
Suite #400
3050 K  Street  N.W.
Washington, D.C.  20007-5108
(202) 342-8400
(202) 342-8451 fax
 		 John Petty, President
 Foreign Bondholders Protective Council

1953 Gallows Road, Suite 220
Vienna, Virginia 22182

Telephone: (703) 744-8400
Fax (703) 506-1484