(Yicai Global) August 23 -- State-owned Beijing Energy Investment Holding has taken over assets of Yongtai Group after the private power generation firm defaulted on a debt repayment.

The two parties have signed an agreement to move ahead with the reorganization, Yongtai unit Wintime Energy said in a statement.

A bond of CNY1.5 billion (USD220) issued by Wintime Energy expired on July 5, but the company was unable to make the repayment including principal and interest to Shanghai Clearing House, thus constituting a substantial default. It marks the first defaulted bond in the second half of the year.

Beijing Energy will become majority shareholder through equity transfers, asset reorganization and injections while helping the Beijing-based firm to reduce the cost of borrowing money and resume normal operations.

Yongtai will sell the assets at a fair market price and has also agreed to allow Beijing Energy to move forward with pre-acquisition processes related to assets of interest. The firm is expected to look for synergies with Yongtai's electricity and coal businesses.

The two parties are yet to sign an official cooperative agreement.

As a comprehensive industrial holding group, Yongtai operates businesses in energy, logistics, investment, real estate, finance and medicine. It now owns three listed companies, namely, Hainan Haide Industry, Greatime International Holdings and Wintime Energy.

After the default, United Ratings lowered Wintime Energy's rating for corporate bonds and long-term credit rating from A to CC. The company also suspended the trading of four other bonds on July 6.

After the debt payment crisis, Yongtai Chairman Wang Guangxi said that the firm would raise funds via several methods including asset sales and debt/equity swaps. At the same time, the company signed strategic cooperative agreements with several banks, under which they would provide continuous loans without withdrawal and liquidity support to the company.

Wintime Energy posted liabilities of CNY78.2 billion in total for the first quarter this year, of which CNY13.7 billion are short-term.

Editor: William Clegg