Creditors of Dongbei Special Steel Group Co Ltd have approved a draft plan to restructure the stricken northeastern Chinese steelmaker, the company said on Tuesday.
An official with the company's public relations office told Reuters the plan was passed at a creditors' meeting on Tuesday morning. He gave no further details.
People with direct knowledge of the matter said the plan was approved by over 80 percent of the 429 creditors attending the meeting.
Under the terms of the agreement, creditors owed more than 500,000 yuan ($75,000) can either convert their debt to equity or be repaid 22.09 percent in cash. Creditors owed less than 500,000 yuan will be paid in full, the people said.
The people were not authorised to speak publicly on the matter and so declined to be identified.
The plan was submitted to the court in Dongbei's home city of Dalian last month, state news agency Xinhua reported at the time.
The government has been urging struggling state-owned enterprises to convert debt to equity after introducing new guidelines last year.
According to the most recent data, the total liabilities of state firms reached 94.13 trillion yuan as at the end of June, up 11.4 percent compared with the same period of last year.
Critics have expressed concern that debt-to-equity schemes offer a lifeline to so-called zombie firms and saddle banks with low-quality assets. However the government has said only viable firms experiencing temporary difficulty qualify for such schemes.
Dongbei is the parent of Shenzhen-listed Fushun Special Steel Co Ltd and is owned by the provincial government of Liaoning in China's northeastern rustbelt.
The firm entered into formal bankruptcy proceedings in October aimed at recovering a reported $10 billion in debt. It defaulted on nine separate bonds last year.
Regulators said earlier this year that the total credit exposure of banks to Dongbei amounted to 44 billion yuan.
China's biggest privately owned steelmaker, Jiangsu Shagang Co Ltd, last month said it expected to be the biggest shareholder in Dongbei once restructuring had been completed.
$1 = 6.6962 yuan
