Updates with further context paragraphs 4 and 6
A Chinese court has allowed the start of bankruptcy procedures for Tianjin Bohai Steel that has faced issues over debt repayments of around $30bn since 2016.
The Tianjin high people's court accepted an application by creditor Tianjin Sai Rui Machinery Equipment for a bankruptcy reorganisation of the steel producer. The outline of the reorganisation is unspecified but it could involve new investors to revive the company.
Creditors and the Tianjin city government had been working on restructuring the company's loans, with a bailout considered by the city government in 2016. Another creditor Tianjin Bank had warned of potential losses on part of its debt with Tianjin Bohai Steel.
The bankruptcy filing was no surprise to the market given the steel producer's unpaid debts have been well known. It had divided into smaller mill entities to attract buyers without success. Chinese banking regulators asked banks to stop lending to "zombie" steel mills, typically chronic loss-making enterprises with state patronage, such as Tianjin Bohai in 2016.
The state-owned steel producer was formed in 2010 with the merger of four steel companies in north China's Tianjin city, including Tianjin Steel Pipe, Tianjin Iron and Steel, Tianjin Tiantie Metallurgy and Tianjin Metallurgy. The group's production capacity was around 17mn t/yr last year, around 75pc of the city's total capacity.
Tianjin city reported crude steel output of 18.12mn t in 2017, up slightly from 17.98mn t in 2016.
