The government of the Chinese city of Tianjin, the only shareholder of bankrupt Bohai Steel Group, is demanding that Bohai’s creditors and strategic investor implement a bankruptcy restructuring plan by the end of September, two creditor sources with direct knowledge of the matter said. Bohai Steel, a former Fortune Global 500 company that was founded by the Tianjin municipal government in 2010 by merging four local steelmakers, collapsed in 2016 with more than 200 billion yuan ($28.4 billion) in unpaid debt, the biggest bankruptcy restructuring in China’s history. The company’s demise followed years of overexpansion fuelled by easy credit that left it heavily leveraged when steel prices plunged to record lows in 2015. The implementation of Bohai’s bankruptcy restructuring plan, which was approved by a local court in January, has been delayed over a power struggle between the Tianjin government, creditors and investors, as well as the local government’s fears of losing state-owned assets and jobs, the sources said. Evergrande, Country Garden among Chinese developers cutting prices to boost sales, further weighing down sluggish economy However, financial pressures from local banks and concerns about the city’s own debt burden have created a new sense of urgency for the Tianjin government to start the Bohai Steel restructuring as soon as possible, they said. The Tianjin government is keen to take action before the 70th anniversary of the founding of the People’s Republic of China on October 1, both sources said, a major event for China’s ruling Communist Party. As a result, a timely reorganisation is now considered a “political task,” they said. “The government is pushing hard … after Bohai there are even more complex cases to deal with,” said one of the sources. Neither the Tianjin government nor the management of Bohai Steel immediately responded to requests for comment sent by fax from Reuters. In Tianjin, some financial institutions have turned their backs on any local companies due to multiple large-scale corporate defaults and the local government’s inability to resolve debt crises involving state firms, bankers have told Reuters. China homebuyers wait for better deals as developers see big drop in contracted sales in July amid economic slowdown The Tianjin government’s debt burden is the highest among China’s provincial-level megacities and provinces, according to S&P Global Ratings, due to a regional economic slowdown as well as curbs on pollution and local government shadow financing. Under the restructuring plan, Bohai Steel will be broken into two parts, steel and non-steel. Delong Steel Group , a mid-sized private steel maker with annual capacity of 3 million tonnes, will buy Bohai’s steel-related assets, said the sources. China’s July home prices cool, as escalating trade war and slowest economic growth in decades send shivers through property market Delong will pay 20 billion yuan for the transaction, equivalent to about 10% of Bohai’s total unpaid debt, said the first of the two sources, another case of a smaller private steelmaker acquiring a floundering state company amid sector-wide consolidation. A representative of Delong’s media department said that the company would not accept any interviews or media requests. The former Bohai assets of Tianjin Iron and Steel, Tianjin Metallurgy Group and Tianjin Tiantie Metallurgy will be combined and renamed New Tianjin Steel and hold production capacity of 14 million tonnes, the first source said. The steel unit’s remaining bank debt is likely to be converted into equity, said the second source, calling the deal a “total bargain” for Delong. “Creditors will make a huge loss in this case. But we’ve got no other choices,” said the first source. Since debt-to-equity swaps were relaunched by China in 2016 as a way to reduce corporate financial leverage, they have become a popular tool for banks to deal with state firms’ debt burdens in government-organised bailouts. While the steel sector used to be dominated by state players with strong government support, private firms that survived Beijing’s campaign to eliminate polluting and inefficient steel capacity are expanding quickly. The Bohai deal will make Delong the 10th largest steel producer by annual production capacity in China, the world’s largest steel producing country.