CREDITORS of Chongqing Iron & Steel Co. (Chongqing Steel) have voted to accept a debt-for-equity swap plan to restructure nearly 40 billion yuan (US$6.04 billion) in debts, the company said in a stock exchange announcement late Friday.

The creditor approval eases some of the pressure on Chongqing Steel as debt-servicing costs rise and after heavy losses in 2015 and 2016.

As China steps up its campaign to reduce financial risk, more State-owned enterprises (SOEs) may be forced to restructure debts, with “non-systemic” local SOEs expected to face more financial strain in the months ahead, some analysts say.

Chongqing Steel’s debt plan will see the company pay in cash portions of claims up to and including 500,000 yuan, and issue new shares for the portions of claims exceeding that level.

In a sign of their eagerness to reclaim money, lenders will receive new shares at 3.68 yuan per share, a 71 percent premium to their last traded price in Shanghai. The shares, to be issued before the end of the year, will not be subject to a lock-up period, a source said.

Trading of Chongqing Steel’s Shanghai-listed A shares has been suspended since Aug. 1. The firm also is listed in Hong Kong.

Lenders to the steelmaker welcomed the approval of the debt-for-equity swap.

“We’re at the back of the line behind the banks and so on, so speaking for myself this is a relatively good outcome,” said a creditor who asked not to be named.

China unveiled guidelines last year to reduce rising corporate debt, including encouraging debt-for-equity swaps.

(SD-Agencies)