Financial creditors of insolvent Guangzhou International Trust and Investment Corp (Gzitic) are facing an estimated loss of about 30 per cent of their outstanding loans under a restructuring proposal put forward by the company's Guangzhou municipal government owner, according to banking sources. This would translate into a loss of more than two billion yuan (about HK$1.86 billion) for foreign creditors, who are owed about 7.34 billion yuan. The write-down in debt, initially estimated by Gzitic's financial adviser, PricewaterhouseCoopers, would come from a loss on interest and capital costs during a proposed 10-year repayment period while the nominal value of liabilities remain unchanged. Under the proposal, Gzitic would repay 35 per cent of its liabilities of 29.7 billion yuan in cash and 15 per cent by asset disposal. The remaining 50 per cent would be settled through financial instruments believed to be linked to a joint-venture commercial bank set up by the Guangzhou municipal government and foreign institutions. These new entities might take the form of securities bearing an annual interest of 1 per cent with guaranteed redemption after 10 years. Creditor banks saw Gzitic as soft-pedalling the restructuring before a scheduled court hearing on the winding-up petition of its Hong Kong finance arm Guangzhou Finance on August 30. Sources close to the banking syndicate said they would study the proposal before deciding on the next course of action. A Guangzhou-based European banker said: 'Repayment over a period of 10 years with only minimal interest servicing is not promising to any bank, but it is a start to negotiations.' A creditor bank official said Gzitic's proposal should put pressure on insolvent Guangdong Enterprises (Holdings) (GDE) to come up with better terms for its restructuring. 'If the Guangzhou municipal government can repay half of the debt in cash, then why cannot the Guangdong provincial government - which is supposed to have more cash-generating assets - do the same for GDE?' he said. Creditor banks said it was unclear how repayments through a commercial bank could be made, and more work would be needed to make this plan acceptable. 'It's better if a convertible bond is used,' a European banker said. 'Say, if the bank can seek a listing in three to five years, creditors will be given a chance to cash in earlier.' A Guangzhou-based Asian banker added: 'At least compared with other Itics, the Guangzhou government is making some guarantees, [which is] 50 per cent in cash and assets. 'I think the main concern is how to deal with the remaining 50 per cent,' he said.