CORRECTED-China's Baoshang Bank to take $1 bln write down on bond

(Corrects wording in first paragraph to “tier-two” from “secondary”)

SHANGHAI, Nov 14 (Reuters) - China’s Baoshang Bank said that it would write down the principal of a 6.5 billion yuan ($984.27 million) tier-two capital bond, nearly a year and a half after the bank’s seizure by regulators.

Baoshang, the small Inner Mongolian lender that was the target of a central bank takeover in May 2019, will write down the full principal amount of the bond and not make remaining coupon payments worth a total of 585.6 million yuan, it said in a statement posted on Friday on the website of the National Interbank Funding Center (NIFC).

Baoshang said the write down followed from commercial bank rules and clauses in the bond’s prospectus after the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBRIC) said in a notice that Baoshang had experienced a “non-viability trigger event”.

That notice, also posted on the NIFC website Friday but dated Wednesday, said that regulators had confirmed that Baoshang was “seriously insolvent” and unviable.

The PBOC said in August that it would allow Baoshang to file for bankruptcy, liquidate any remaining assets and write off some unpaid debts.

The Baoshang takeover, which regulators said was due to “serious credit risks”, shocked financial markets and sent interbank borrowing costs rocketing higher before the PBOC soothed nerves with large liquidity injections. ($1 = 6.6039 Chinese yuan) (Reporting by Andrew Galbraith; Editing by Kim Coghill)