Beijing - A $1.44 billion (R18.8 billion) restructuring deal at an insolvent coal-mining company in eastern Shandong province offers a glimpse into how China is preparing to tackle a corporate debt burden that has ballooned to $17.9 trillion (R234.5 triilion).
Loss-making Feicheng Mining Group struck the deal last December with 10 banks, which agreed to extend the group’s loans at concessionary interest rates.
Bankers say the settlement advanced only after the formation of a creditors’ committee, a mechanism the China Banking Regulatory Commission (CBRC) endorsed last year to manage “troubled firms with a large volume of debt”.
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At the opening of parliament on Sunday, Premier Li Keqiang identified “bringing down the leverage of enterprises” as a key task this year.
With bankruptcy, particularly at state-owned companies, practically taboo in China, and lenders forbidden by the CBRC from halting or recalling loans without notice, creditors’ committees are at the vanguard of this monumental exercise.