Caixin
Dec 02, 2020 05:51 PM
FINANCE

Exclusive: Defaulting Coal Miner’s Debt Restructuring Plan Faces Creditor Backlash

What’s new: Coal miner Wintime Energy Co. Ltd. on Monday released a debt-for-equity swap proposal as part of its draft restructuring plan which has faced a significant creditor backlash, knowledgeable sources told Caixin.

As of Nov. 22, a total of 714 creditors had reported that Wintime owed them 49.8 billion yuan ($7.6 billion), according to Wintime’s filing (link in Chinese) with the Shanghai Stock Exchange.

In a preliminary review, Shanghai-listed Wintime had confirmed about 36.4 billion yuan of the debt, 30.9 billion yuan of which was categorized as unsecured debt, according to the draft restructuring plan seen by Caixin. Some of the unsecured debt would be swapped for equity, which means creditors would exchange the debt they are owed for an equity stake in Wintime, according to the plan.

What triggered creditor concerns was the lockup period for the equity. Initially, Wintime proposed several different lockup periods, with most creditors choosing the version that required the equity to be locked up for one year with an option to sell 50% of the shares every six months thereafter, Caixin has learned from several creditors.

However, the draft plan Wintime released Monday showed that creditors would have to hold the shares for six months and could only sell up to one-sixth of them every quarter afterwards, which would take creditors more time to sell off their holdings than that of the initial proposal.

What’s the background: Wintime has been struggling with a liquidity squeeze. In July 2018, it defaulted on a 1.5 billion yuan commercial paper, and has since missed several debt repayments. In September, a court accepted (link in Chinese) a creditor’s application to restructure the company, meaning that Wintime has entered restructuring proceedings.

At the end of September, Wintime had 78.2 billion yuan in total liabilities and 107.1 billion yuan in total assets, according to its third-quarter report (link in Chinese).

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full Caixin article in Chinese, click here.

Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Marcus Ryder (marcusryder@caixin.com)

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