China’s Tewoo Seeks Court-Approved $34 Billion Debt Restructure

(Bloomberg) -- China’s Tewoo Group is pursuing a court-approved restructuring of its 240 billion yuan ($34 billion) debt, according to people with knowledge of the matter, as the embattled commodity trader seeks to right itself after the biggest dollar bond default by a state-backed firm in more than two decades.

The Tianjin-based company met with creditors Thursday and plans to announce as soon as Friday that a local court has accepted the restructuring plan, said the people, who asked not to be identified as the matter isn’t public yet. The details of the plan weren’t immediately available.

Nobody answered calls to the company’s main number, and the media office of the State-owned Assets Supervision & Administration Commission office in Tianjin wasn’t available for comment.

Tewoo’s dollar bond default in December, the largest for a Chinese state-owned entity since the collapse of Guangdong International Trust and Investment Corp. in 1998, was a sign that the worst economic slowdown in decades is limiting Beijing’s capacity to bail out its weaker state firms. As a result, the authorities appear increasingly willing to use a more market-oriented approach to clean up the mess.

Its bond failure also dealt a blow to long-standing perceptions that prominent state-backed firms are much safer bets for investors amid an explosion of souring debt in the country’s ailing private sector. How Tewoo’s debt restructuring pans out will also serve as a key indicator of the playbook that Beijing adopts for its troubled state borrowers.

Once China’s top importer of refined copper and with a trading book that spanned minerals to diary products to fuel oil, Tewoo has also decided to wind down some subsidiaries and eventually close them, the people said.

Tewoo’s restructuring also tracks the overall credit rating of its home city of Tianjin, a port near Beijing that has one of China’s highest ratios of debt-to-GDP from local government financing vehicles. Tianjin has seen rating downgrades among several government-related entities after defaults in recent years by local state-owned firms.

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With assistance from Bloomberg