SEVEN large Shanxi Province-owned coal miners will be permitted to extend the maturities of some existing debt, Xinhua reported yesterday, as regulators continue their efforts to provide a softer landing for the stricken sector.

    Citing a document released by the Shanxi branch of China’s banking regulator, Xinhua said Shanxi banking sector institutions have been asked to help the coal firms convert short-term liquidity loans into medium and long-term loans.

    China has been trying to prop up an industry that employs around six million people but is struggling with declining demand, crippling oversupply and a concerted government effort to promote cleaner forms of energy.

    As part of pledges to curb overcapacity, China said in February that it would establish mechanisms to help restructure debt in the sector. It also promised to create incentives to transfer debt to specialist asset managers.

    China’s coal industry, the largest in the world, has been punished by a brutal collapse in prices since late 2014. Despite a moderate recovery in recent months, Chinese benchmark thermal coal prices remain around 30 percent lower than 2014.

    China’s legacy coal and steel regions have also been struggling to refinance themselves through conventional lenders, resulting in growing bond defaults in provinces like Shanxi and Liaoning.

    The Economic Information Daily said yesterday regulators have drawn up proposals to allow debts of steel and coal firms to be converted into equity, with asset management companies (AMCs) set to play a major role.

    A source at one of China’s major asset management firms suggested State-owned AMCs were now a more appropriate vehicle for debt-for-equity swaps than cautious banks.

    “It isn’t about market choices, but is influenced by government policy,” the source said, noting that the firm still holds assets handed over during a previous round of debt-for-equity swaps nearly 20 years ago. (SD-Agencies)