Haixin Iron & Steel Group, an unlisted Chinese steelmaker that halted production in March because of a capital shortage, started bankruptcy proceedings, making it the largest mill in the nation to enter the procedure.A reorganization application for the Wenxi, Shanxi province-based company was accepted by the Yuncheng City Intermediate People’s Court, according to a statement posted on chinacourt.org, a government site that lists legal proceedings. Creditors are required to claim their rights by Feb. 22, the statement said.
China’s slowing economy and the country’s measures to tackle pollution are taking a toll on its steelmakers already plagued by industry overcapacity. Haixin Group’s bankruptcy will be followed by others, according to researcher Mysteel.com Chief Analyst Xu Xiangchun.
“Instead of reorganization efforts conducted by local governments, this is an inevitable trend that China will take more ailing steel mills to the courts to protect creditors,” Xu said by phone from Beijing.
A composite steel price index fell below 90 in September, hitting a historical low, Wang Xiaoqi, vice chairman of the China Iron & Steel Association, said Nov. 4. China’s economy may grow at 7 percent in 2015, the slowest annual pace since 1990, said Fan Jianping, chief economist at the State Information Center under the National Development and Reform Commission, China’s top planning agency, on Oct. 25.
Haixin Group has 10.5 billion yuan of debt, compared with 10.1 billion of assets, the official Xinhua News Agency reported yesterday, citing “public data.” Haixin, which has the capacity to produce 6 million metric tons of the alloy annually, defaulted on 3 billion yuan of debt repayments, S&P said in a March 31 note.
Starting bankruptcy proceedings will help Haixin trim its debts before a takeover, said Wu Wenzhang, chairman of researcher Steelhome.cn.
Haixin closed its blast furnaces because of a capital shortage, Duan Xuehui, head of the general office at the closely-held mill, said in April. Three calls to Duan today went unanswered.
Source: Bloomberg
