This is a kind of credit protection that we see mainly in the Chinese market of $791 billion in dollar bonds (those sold outside mainland China are denominated in US dollars). The Keepwell provision often involves a commitment by a Chinese company to keep an offshore subsidiary issuing the bonds solvent, but without a guarantee of payment to bondholders. (Effective safeguards require administrative clearance, but not Keepwell.) The clauses often contain an agreement in which the parent company acquires equity shares or assets in the offshore subsidiary in order to serve payments for foreign bonds, according to an analysis by Fitch Ratings. Terms may vary with different definitions of the standard, trigger events, or actions that the keepwell provider promises to take. “We find that the market doesn`t seem to distinguish between shows that use a Keepwell structure rather than an onshore mother guarantee.” Keepwell bond issuance remains strong despite uncertainties The ongoing restructuring case involves the issuance of super short commercial paper by PKU Group as well as bonds of Nuoxi Capital Limited (“Nuoxi”) and Kunzhi Limited (“Kunzhi”), backed by a Keepwell document provided by PKU Group. In accordance with this Keepwell Act, PKU Group has undertaken to ensure (among other things) that “each issuer and the guarantor have sufficient liquidity to ensure the timely payment by each issuer and by the guarantors of the sums to be paid in connection with or in respect of the bonds”. Despite an extension of its lifespan, the PKU Group did not repay the commercial paper by the due date. On 14 February 2020, the Bank of Beijing requested a court in the PRC to open reorganization proceedings against PKU Group. Soon after, Nuoxi and Kunzhi also fell behind in their obligations. “The practical consequence of the non-registration of a guarantee is that the parent of the PRC is prohibited from transferring funds outside the PRC to fulfil its guarantee obligations. The Keepwell structure was therefore designed to overcome this registration requirement,” the law firm said. Regardless of the actual content of a Keepwell document, we found that the central theme would generally remain the same: that a Keepwell act is essentially a series of contractual obligations aimed at giving the receiving party a sense of comfort (indeed, we have worked on transactions in which the parties expressly require that the document in question be called an administrative letter). .