(Yicai Global) Oct. 11 -- Bankruptcy reorganization has finally started at Dongbei Special Steel Group following a series of debt defaults this year.
Dalian Intermediate People's Court accepted the application for bankruptcy reorganization filed by Alxa League Jinzhen Smelting Co. against Dongbei Special Steel Group, marking the official start of their post-bankruptcy rehabilitation.
"It is the first time for a debt dispute involving a large local state-owned enterprise to be solved through a market-based approach, that is public bankruptcy reorganization, Mr. Li Jin, chief analyst at the China Enterprise Research Institute said in an interview with Yicai Global. If the rehabilitation is successful, Dongbei Special Steel may be revitalized in two to three years".
"Bankruptcy reorganization is inherently different from liquidation. The former is a process where the company reorganizes assets, debts and businesses under the supervision of the court, and the objective is to pull it out of difficulties. In the case of the latter, the company's assets are monetized and distributed, where the goal is for the company to liquidate and exit the market", Mr. Li said.
The Liaoning provincial government helped the company postpone the default on bond repayment in March this year, before the first default, however, due to the sheer size of the debts owed, it was impossible to tide it over by "borrowing new loans to repay existing debts," Mr. Xu Jisheng, Deputy Director of Anhui province's assets supervision and administration commission, which represents shareholders of Dongbei Steel.
The company has defaulted on nine bond repayments, and its debts total over CNY55.3 billion, outstripping its total assets shown in the latest published financial statement.
As a large special steel producer, Dongbei Special Steel Group is a leader in the Chinese special steel market. Its special steel products make up over 80 percent of the defense and military market in China.