BANK of China, the country’s fourth-largest commercial lender, and five other domestic banks have signed a debt restructuring deal with troubled steelmaker Sinosteel, in what is among the first significant restructuring deals involving a State-owned enterprise.

    As the country’s pace of growth stutters, China has made reform of its State-owned enterprises (SOEs) a priority in a bid to kindle competitive behavior.

    In a statement Friday, Bank of China (BOC) outlined details of the agreement with Sinosteel, which could be the formula used for other major overhauls of struggling State-owned firms.

    Sinosteel became one of the first State-owned firms to encounter bond repayment problems in 2015. The government approved the restructuring in September, according to an announcement by a Sinosteel unit at the time.

    The first phase of the debt restructuring will be for more than 60 billion yuan (US$8.70 billion) in debt, including principal and interest. That debt will be divided into two parts. One part will be kept by financial creditors.

    For the rest, Sinosteel will set up a stake holding vehicle to issue convertible debt to creditors to swap existing debt, and creditors will have the option to swap convertible debt into equity under certain conditions.

    In September, China launched a US$52.5 billion State enterprise restructuring fund to advance its supply-side reforms.

    Beijing-based Sinosteel narrowly averted default twice last year on its bonds only after the government intervened to persuade creditors to extend its repayment deadlines.

    (SD-Agencies)