SHANGHAI, April 25 (Reuters) - China’s debt-stricken Chongqing Iron and Steel Company warned of the risk of bankruptcy on Tuesday, after one of its creditors submitted an application to a local court to reorganise its assets.
Chongqing Steel said in a notice posted to the Hong Kong Stock Exchange that the creditor, identified as Chongqing Laiquyuan Trading, told a court on Monday that the southwest China-based steelmaker’s assets were not sufficient to pay off all its debts.
“If the court formally accepts the application for reorganisation...(Chongqing Steel) will be exposed to the risk of declaration of bankruptcy,” it said.
The firm, which has blamed its predicament on China’s economic downturn, industrial overcapacity, soaring labour costs and low steel prices, has tried to expand into more profitable sectors and ditch its steelmaking assets, which operate at a loss.
But it said last week that there was “great uncertainty” whether its restructuring plans could proceed, with the firm struggling to reach an agreement with its main creditors.
Chongqing Steel’s audited net profits and assets were negative for both 2015 and 2016, and if they remain the same this year, the Shanghai Stock Exchange will suspend trading in the company’s shares, it said.
The firm’s former deputy general manager, Dong Ronghua, was put under investigation by China’s graft-busting agency late last year for unspecified “serious disciplinary violations”.
Reporting by David Stanway; Editing by Randy Fabi