Washington invoked what BBG called “the nuclear option” Thursday night, meaning that a new prohibition on sales of components to the Chinese telecom giant will take place on Friday.
And as investors question how Huawei will adapt, or whether this new status might have serious repercussions for its business, they sold first and asked questions later, with Huawei’s dollar-denominated bonds (4% of 2027) suffered their largest drop on record in the past two days.
The company’s 4% due-2027 notes plunged by a record 2.1 cents to 94 cents on the dollar as of 3:49 am in Hong Kong, their lowest level in two months. Huawei’s 4.125% 2026s also fell 2 cents to 95.4 cents on the dollar as creditors fled the Chinese telecom giant.
The drop outpaced the declines in Asian equity and currency markets, which have been reeling from Beijing’s aggressive trade rhetoric.
The plunge came even as China’s Economic Daily reported overnight that Huawei has “drafted a contingency plan years ago to cope with restrictions on the supply of U.S. chips and technologies one day,” citing a letter to employees from He Tingbo, president of Huawei’s chip division Hisilicon. The report also claimed that Huawei will be able to continue its service to clients in such a scenario, and will push for innovation and achieve technological independence.
For now, the most likely scenario the company’s suddenly panicking bondholders are seeing is insolvency.
This article first appeared on Zerohedge