Chinese coal mining company Wintime Energy can’t pay its debts.

Since the middle of this year, the Shanghai-listed energy provider has been unable to meet repayment obligations after quadrupling its debt load in less than five years.

Asset sales have reportedly been on the table, along with complex debt-restructuring options.

Wintime’s latest plan — to include the issued debt of a healthier subsidiary as part of a revised loan package — has markets nervous.

The move encapsulates one of the problems posed by China’s murky debt-capital markets, which don’t have fully developed laws around loan obligations and are only partially open to international investors.

According to Bloomberg, Wintime is trying to structure a 70 billion yuan ($10 billion) revised debt package.

And as part of the restructure, it wants to include a $500 million loan issued to offshore investors by subsidiary Huachen Energy.

Huachen hasn’t defaulted on its offshore loan, so bundling that loan together with riskier Wintime debts may convince creditors to keep the company afloat.

Markets are watching how the transaction plays out because it may be a test case for Chinese capital markets, given China’s bankruptcy laws don’t expressly cover the use of subsidiary debt in loan restructures.

Earlier this year, the Supreme People’s Court — China’s highest court — said it should only be done in exceptional circumstances, where the parent and subsidiary are closely linked.

However, based on recent analysis from credit ratings agency Moody’s, Huachen isn’t looking too healthy itself.

Earlier this month, Moody’s downgraded Huachen’s credit rating after the company announced it had defaulted on one of its domestic loans.

Moody’s said the downgrade was also due to concerns over Huachen’s “already weak liquidity position, and our view that the company might have difficulty in meeting the upcoming interest coupon payment for its US$500 million senior unsecured notes.”

And Moody’s added that Huachen’s domestic loan default was partly due to the debt problems of its parent company Wintime, which have “created significant stress on Huachen’s liquidity position.”

Huachen’s rating “could be downgraded further if there is a broad scale default,” Moody’s said, adding that asset sales are likely to be required for Huachen to meet its repayments.

Wintime has fallen into arrears on around 15 billion yuan worth of domestic-issued loans in 2018, Bloomberg reports.

The company wants to repackage its debt into a rolling three-year structure, paying back 10 to 15% of the debt every three years at rates derived from China’s benchmark lending rates.

It’s also offered investors debt-to-equity swaps on around 30% of its outstanding debt.

The problems faced by Wintime and Huachen Energy show that investors need to be aware of subsidiary structures in China when considering the purchase of off-shore debt products.