CHINA Construction Bank (CCB), the country’s second-biggest lender, has signed a debt-to-equity swap with Yunnan Tin Group Co., in a landmark deal in the government’s push to cut mounting corporate debt.

    CCB yesterday agreed to make a 5 billion yuan (US$750 million) initial investment in Yunnan Tin, as part of a 10 billion yuan deal aimed at lowering the leverage of the world’s biggest tin producer and exporter by 15 percentage points.

    The deal marks the first debt-to-equity swap between a Chinese bank and a local government-owned firm, CCB said.

    It comes after policymakers last Monday unveiled a multi-pronged plan, led in part by debt-to-equity swaps, to reduce China’s US$18 trillion in corporate debt, which was equivalent to about 169 percent of gross domestic product.

    “This is our way to get rid of current cyclical difficulties and problems,” Yunnan Tin chairman Zhang Tao told reporters.

    Yunnan Tin booked a total loss of more than 6 billion yuan over the past three years, said Zhang Minghe, who leads CCB’s debt-to-equity swaps work team.

    “It [Yunnan Tin] is the leader of the tin industry in China and even in the world. It’s a national industry brand. It’s our pride. It’s a major battlefield for tin and other strategically important metal industries,” he also said.

    Under the plan signed yesterday, CCB will raise money from various sources to fund the debt swap deal, said Zhang Minghe.

    The money will be raised from institutional investors, such as insurance asset management firms, pension funds, securities firms and qualified individual investors through wealth management products. (SD-Agencies)