Steel default exposes creditor anger at political interference

A series of bond defaults in north-east China is exposing creditors’ frustration at the lack of a transparent process for resolving bad debt, the Financial Times reports.  President Xi Jinping’s push for “supply-side reform” is centered on cutting excess capacity and paring back credit to so-called zombie companies, many of them state-owned. That is setting up conflicts between creditors and local governments. Dongbei Special Steel, majority-owned by Liaoning province, has defaulted seven times on bond principal and interest payments worth Rmb4.8bn ($715m). In March its chairman was found dead. In a sign of creditors’ mounting frustration, Dongbei Special bondholders circulated a draft petition last week calling on the main bond market regulator to take the unprecedented step of suspending approvals for all Liaoning-based companies.