ICBC Swaps Debt for Equity in Two Listed Firms as China Looks to Cut Big Borrowers' Debts
Tang Shihua
/SOURCE : Yicai
ICBC Swaps Debt for Equity in Two Listed Firms as China Looks to Cut Big Borrowers' Debts

(Yicai Global) Oct. 18 -- State-owned Industrial and Commercial Bank of China, the world's biggest bank in terms of assets, has agreed to write off debts at two cash-strapped listed companies in exchange for shares as the central government pushes to reduce leverage at debt-laden enterprises.

ICBC Financial Asset Investment will conduct the debt-for-equity swaps with paper maker Shandong Chenming Paper Holdings and Eternal Asia Supply Chain Management, which connects service providers around the globe, according to separate statements published by the borrowers yesterday.

China has been pushing to deleverage big borrowers since late 2016 in order to cut its corporate debt, which stood at USD18 trillion at the time. Set up in April 2017, ICBC Financial Asset Investment was the third bank subsidiary approved to conduct debt-for-equity swaps in order to achieve that goal.

Under the two agreements, ICBC will pick up shares worth at least CNY3 billion (USD433 million) in each of the debtors. The actual number is yet to be finalized and the amount of debt ICBC carries for the pair was not disclosed.

Chenming Paper's total assets were CNY107 billion as of the end of June, at an asset-liability ratio of 72.95 percent, up from 71.34 percent at the end of 2017, according to company financials. Eternal Asia had CNY44 billion in assets at the half-year mark with a higher ratio of 79.72 percent -- down slightly from 81.69 percent at the end of last year, its financial statements show.

Editor: James Boynton

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Keywords: Debt-For-Equity Swap , Deleverage , ICBC , Chenming Paper , Eternal Asia