A Landmark Debt Restructuring Case In China's Bond Markets

On August 11, 2017, the Dalian Intermediate People's Court approved the proposed bankruptcy restructuring plan of Dongbei Special Steel Group Co. Ltd., a state-owned enterprise ("SOE") which defaulted on debt payments. This is the first case that a Chinese company adopts a debt/equity swap in resolving defaults on its publicly issued bonds.

The major points of the proposed bankruptcy restructuring plan are as follows:

1. The total amount of restructured debt is RMB 45.6 billion.
2. Each creditor is entitled to a full repayment of a debt up to RMB 0.5 million.
3. For any debt over RMB 0.5 million, non-financial creditors and bond holders may choose either to get a lump sum partial repayment in cash or to swap that debt in full for equity, while financial creditors only have the later choice.