SHANGHAI (Reuters) – A listed Chinese coal conglomerate that defaulted on bonds worth about $2 billion (1.5 billion pounds) could file for bankruptcy under a restructuring plan proposed by creditors, a document seen by Reuters shows, as record bond defaults push China to improve risk management.
Beijing-based Wintime Energy Co Ltd <600157.SS>, saddled with debt worth more than $10 billion, would use a combination of asset disposals, debt-for-equity swaps and extended deadlines to improve its debt structure and ease liquidity stress, according to the plan.
The company and a creditor source confirmed the proposal as genuine.
Under the proposal, Wintime will repay a portion of its 29.3 billion yuan ($4.20 billion) in unsecured debts through asset disposals and debt-to-equity swaps. The remaining debt will be extended for 12 years, with repayments financed by cashflows generated by subsidiaries.
Wintime’s subsidiaries will restructure their debt out of court as a supplementary plan through asset disposals and term extensions, according to the document.
A bond investor, who declined to be identified, said that the proposal is still subject to negotiations as the restructuring could risk Wintime’s major shareholders losing control of the company.
The document sets a deadline of Jan. 17 for feedback on its proposals.
But another source briefed on the restructuring plan said that the company’s bank creditors have agreed to the proposal to extend the debt repayment period, while non-bank creditors have “largely agreed to convert the debt to equity.”
Wintime has missed payments on onshore bonds with a total principal value of 14.71 billion yuan since 2018, according to Refinitiv data. A subsidiary, Huachen Energy Co Ltd, has also defaulted on a $500 million U.S. dollar bond, the data shows.
Chinese companies defaulted on bond payments at a record rate in 2019, squeezed by the slowest pace of growth in three decades due to weak demand and a trade war with the United States.
While the rise in defaults reflects authorities’ eagerness to reduce expectations of implicit state backing, high-profile missed payments last year by state-owned enterprises in onshore and offshore markets raised fresh concerns about debt and contagion risks.
In December, regulators introduced new rules that improve market-based disposals of bad corporate debt in a push to reduce systemic financial risks.
(Reporting by Andrew Galbraith, Steven Bian and Samuel Shen; Editing by Sam Holmes)