Two more indebted Shandong province companies entered official bankruptcy proceedings on Friday, as the region’s industrial debt problem deepens after a series of corporate defaults, said Caixin.
A number of local private enterprises were hit by a debt crisis last year, and many of the companies had provided mutual guarantees for each other’s debt to obtain credit from banks. When companies began to face cash-flow problems, the situation triggered a chain reaction of missed repayments on loans and bonds.
Two of the companies caught in the mutual guarantees crisis are steel-cord maker Shandong SNTON Group Co. Ltd. and local industrial conglomerate Eastar Holding Group Co. Ltd. Both companies have submitted bankruptcy filings to a court in the city of Dongying.
The filing showed SNTON had RMB 8.6 billion ($1.2 billion) in assets by the end of November, with a debt-to-asset ratio of 181.3%, while Eastar’s total assets were worth RMB 5.9 billion by November, and its debt-to-asset ratio was 167%.