China's Dongbei Special Steel Defaults Ninth Time In 2016, Restructuring Looms
27 September 2016
Dongbei Special Steel Group Co Ltd said on Monday it had defaulted on a one-year bond, the latest in a string of missed payments this year by the unlisted Chinese steelmaker.
It marks Dongbei's ninth default of 2016.
Owned by the Liaoning provincial government in China's northeast rust belt, Dongbei announced on the website of China's interbank bond market operator that it had failed to pay 744 million yuan of principle and interest on a one-year bond.
It had warned earlier in September it was uncertain if it could make payment. [nRSD9sWKbv]
Its original default in March helped ignite a selloff in Chinese corporate debt. In recent months, bond prices have rallied, prompting central bank intervention seen by dealers as a sign it is concerned about bond market leverage. [nL3N1BC2YC]
Dongbei said on Sept 5 it was delaying the disclosure of its interim financial information as it was in the midst of a debt restructuring plan.
Citing a source familiar with the matter, Reuters IFR reported earlier on Monday that the Liaoning government had decided to file for a court-ordered restructuring after creditors rejected an initial proposal to swap debt for equity.
Many of China's corporate debt problems can be found in the northeast, the home of the country's steel industry and a region heavily dependent on the big industry that fuelled China's economic expansion. Now Beijing is pushing to shut surplus capacity and reform inefficient state enterprises.
In May, a Reuters analysis of central bank data showed that Chinese rust-belt provinces, including Liaoning, had sharply raised their dependence on high-cost "shadow finance" in early 2016, as traditional lenders pulled back.
Source : reuters.com