BEIJING, Dec 1 (Reuters) - State-owned Dongbei Special Steel Group Co held its first creditor meeting on Thursday as part of a bankruptcy restructuring process aimed at recovering a reported $10 billion in debt, official news agency Xinhua said.
Dongbei has been at the heart of troubles in China’s debt market this year, defaulting on nine separate bonds since March even as Beijing has vowed to crack down on “zombie” firms with perennial losses and too much debt.
Owned by the Liaoning provincial government in the country’s “rustbelt” northeast, the group formally entered into the bankruptcy restructuring process in October following a court filing by a creditor and supplier.
Thursday’s meeting, held by a court in the northeastern city of Dalian, was attended by 374 creditors, Dongbei’s restructuring management team and staff representatives, asset valuation agencies and auditors, Xinhua reported.
Creditors have reported about 70 billion yuan ($10 billion) in total debt to the court, the report said, adding that the amount needed to be checked and confirmed.
The court appointed a local branch of Bank of China Ltd , the country’s fourth-biggest state lender, to chair the creditor meeting, Xinhua said.
Dongbei Special Steel has been in touch with several potential strategic investors and started an asset valuation process, the report said, adding that several central government-owned enterprises and listed companies have expressed interest in investing in the group.
Dongbei’s first bond default in late March helped trigger a sharp sell-off in corporate debt markets as investors reassessed the likelihood of bailouts for key provincial government-owned enterprises, especially in the coal and steel sectors hobbled by excess capacity.
Over-capacity and slowing demand led to a slump in prices that devastated the steel sector last year, saddling many Chinese mills with losses and adding to their debt burden.
China has sought to improve the sector’s fortunes by ordering the closure of up to 150 million tonnes of capacity over 2016 to 2020, helping a recovery in prices.
Dongbei’s extended struggle with creditors over how to restructure its debt has highlighted the inefficient process of debt restructuring at Chinese state-owned firms.
The group’s chairman, Yang Hua, was found dead in March in an apparent suicide.
Dongbei Special Steel’s two subsidiaries, Dalian Special Steel Co and Dalian High Alloy Bar and Wire Rod Co, will hold their first creditor meetings on Thursday afternoon and Friday morning respectively, Xinhua reported. ($1 = 6.8949 Chinese yuan renminbi) (Reporting By Shu Zhang in BEIJING and David Stanway in SHANGHAI; Editing by Richard Pullin)