Enforceability of Keepwell Agreements in Cross-Border Bonds: Citicorp v. Tsinghua Unigroup (HCA 1269/2021)

Based on the judgment in Citicorp v. Tsinghua Unigroup (HCA 1269/2021), this paper analyzes the enforceability of Keepwell Agreements and Equity Purchase Agreements (EIPU) in cross-border USD bonds through the lens of Chinese law application, contractual obligation interpretation, and regulatory compliance. The study examines the Hong Kong High Court’s findings regarding Tsinghua Unigroup’s breach of its Keepwell and EIPU obligations, focusing on disputed issues such as the nature of credit enhancement instruments, regulatory approval defenses, "best efforts" obligations, and loss calculation. The court determined that the Keepwell Deed and EIPU constitute legally binding credit enhancement measures distinct from guarantees under Chinese Civil Law and rejected Tsinghua’s regulatory approval defense due to its failure to demonstrate active efforts to secure approvals. The judgment establishes that breach of such agreements triggers full liability for bond principal, accrued interest, and associated costs. The case underscores that proactive compliance with financial regulations—without invalidating contracts—and rigorous fulfillment of "Best Efforts" obligations are critical in cross-bond transactions governed by Chinese law