Construction Bank in $743 Million Debt Program With Yunnan Tin

  • Second debt pact struck with a China SOE in the past week
  • Policy makers stepping up fight against corporate leverage

China Construction Bank Corp., the nation’s second-largest lender, said it agreed to form an almost 5 billion yuan ($743 million) debt-to-equity pact with Yunnan Tin Group.

The agreement is part of a larger 10-billion yuan framework the two companies signed to cut Yunnan Tin’s debt ratio, the Beijing-based lender said in a statement on its website on Sunday. It didn’t provide any specifics of the agreement.

The accord is the second debt-relief program Construction Bank has announced in the past week with state-owned enterprises. On Tuesday, the lender announced plans to raise 24 billion yuan for a fund to help lower Wuhan Iron & Steel Group’s debt levels. The bank also flagged its involvement with Yunnan Tin, saying at the time it was seeking to cooperate with the company to lower its leverage.

Chinese policy makers are stepping up their fight against excessive leverage, with cabinet in the past week releasing guidelines for reducing corporate debt and for how banks may swap debt to equity. Corporate debt jumped to 165 percent of China’s gross domestic product in 2015 from 105 percent a decade ago, according to Bloomberg Intelligence.

Yunnan Tin is expected to deliver a total profit of at least 2.3 billion yuan, or not less than 81 billion yuan in income, to investors by 2020, Construction Bank said in its statement.

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