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Report: China's Tianjin city pushes creditors to start Bohai Steel restructuring

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Report: China's Tianjin city pushes creditors to start Bohai Steel restructuring

The Tianjin government, the sole shareholder of bankrupt producer Bohai Steel Group Co. Ltd., is urging the company's creditors to execute a bankruptcy restructuring plan by the end of September, Reuters reported Aug. 21, citing two creditor sources with direct knowledge of the matter.

The urgency is a result of financial pressures from local banks and concerns about the Chinese city's own debt burden, according to the sources.

The company, founded in 2010 by merging four local steelmakers, collapsed in 2016 with over 200 billion Chinese yuan in unpaid debt.

Wrangling between the Tianjin government, creditors and investors has caused delays in implementing the restructuring plan, with the city fearing the loss of state-owned assets and jobs.

Under the restructuring plan, which was approved by a local court in January, the company will be broken into two units: steel and nonsteel.

One of the sources told Reuters that private steelmaker Delong Steel Group will buy Bohai's steel assets for 20 billion yuan, equivalent to about 10% of the group's total unpaid debt. Delong Steel has an annual capacity of about 3 million tonnes.

The former Bohai assets of Tianjin Iron and Steel, Tianjin Metallurgy Group and Tianjin Tiantie Metallurgy, which have a production capacity of 14 Mt, will be combined and renamed New Tianjin Steel, the other source said.

Meanwhile, the steel unit's remaining bank debt is expected to be converted into equity, though this will result in huge losses for creditors, the other source told Reuters.

Neither the Tianjin government nor the two companies have commented on the scenario. Securing the assets would make Delong Steel the 10th-largest steel producer by annual production capacity in China, the newswire added.

As of Aug. 20, US$1 was equivalent to 7.06 Chinese yuan.