Jan 31, 2019 (China Knowledge) - Representatives of Bohai Steel’s more than 100 creditors have approved a bankruptcy reorganization plan to restructure the debt-ridden company.
The approval comes three years after the company was wrecked by a debt crisis and may allow its creditors to recover its USD 36 billion worth of debts and may even allow the company to revive its business.
Bohai Steel’s bankruptcy reorganization is China’s largest ever effort to bailout a financially crippled company after the National Development and Reform Commission assessed the case and deemed the company still worthy of a rescue.
The reorganization effort will involve 48 companies under the Bohai Steel umbrella and will see the liquidation of another 160 subsidiaries.
As of April, last year, Bohai Steel and its subsidiaries had USD 36 billion worth of outstanding debts but only USD 17 billion worth of assets, leading the company’s bankruptcy administrators to come up with a 10-year plan to restructure company.
Under the plan, Bohai Steel’s assets will be divided into 17 companies with its core steel business assets and another 31 companies with non-core assets. The core business arms which is worth USD 8.7 billion will be partially sold to private steel manufacturer Tangshan Delong Co., with the latter also agreeing to invest another USD 3 billion into Bohai Steel to repay debts and support its business operations.
Bankruptcy administrators hope that the new investor will be able to revitalize Bohai Steel’s business and allow it to qualify for a public listing in 2023 which will allow some of its creditors to exit.
As for the company’s non-core assets, these will be sold to bad loan manager China Cinda Asset Management Co., to be repackaged into a trust product and generate yields for creditors.
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