FerroChina Says It Can't Repay Loans, Blames `Crisis' (Update2)
By Luzi Ann Javier and Helen Yuan
Oct. 9 (Bloomberg) -- FerroChina Ltd., a Chinese steelmaker, said it is unable to repay loans totaling 706 million yuan ($104 million) because of the ``current economic crisis,'' and a further 4.52 billion yuan in loans and notes may also be at risk.
Production at FerroChina's plants has been suspended and the mill is in talks with creditors and potential investors, the company said today in a statement to the Singapore Stock Exchange, without identifying companies.
The escalating credit crunch has toppled banks in the U.S. and Europe, frozen credit markets and slowed economic growth, curbing demand for China-made products. Steel prices and demand in China have been declining.
``The company has been having financing problems for a while,'' JPMorgan Chase & Co. analyst Zhang Qin said by phone from Hong Kong. ``It has been looking for foreign strategic investors for a restructuring.''
The company, which has a market value of S$436 million ($297 million), requested on Oct. 7 that its Singapore-listed shares be suspended from trade. The stock, which last traded at 54.5 Singapore cents, has slumped 70 percent this year.
A call to FerroChina's company secretary in Singapore by Bloomberg News was not answered.
``Due to the current economic crisis, the group is unable to repay part of its working capital loans aggregating approximately 706 million yuan which has become due and payable,'' the statement said. ``The management is seeking new equity and loan funding.''
Further loan facilities and notes of about 2.03 billion yuan and ``some other working capital loans'' totaling 2.49 billion yuan may potentially become due, it said.
Changshu Plants
FerroChina has plants in Changshu City and Changshu Riverside Industrial Park in Jiangsu province, according to today's statement. The company produced 1.65 million metric tons of steel in 2007, according to Kelly Chia, an analyst at OCBC Investment Research Pte.
``It could be because some of its customers weren't able to pay up, or the price of its products weren't enough to fund its working capital,'' Chia said by phone from Singapore.
FerroChina reported net profit more than tripled to 230.4 million yuan in the second quarter from a year earlier, according to a slides presentation from the company on Aug. 14.
``Given the weak capital market and poor economic conditions, there is no assurance that we can be successful'' in the talks with potential investors and creditors, today's statement said. The talks with would-be investors were announced in a company statement on Sept. 16.
``As a zinc-galvanizing steel sheet producer, the slowdown in building, manufacturing and home-appliance industries hurt the company's sales,'' JPMorgan Chase's Qin said.
The Chinese price of hot-rolled coil, a benchmark product, has fallen 29 percent to 4,230 yuan a ton from a record 5,957 yuan on June 5, according to Beijing Antaike Information Development Co.
To contact the reporters for this story: Luzi Ann Javier in Singapore at [email protected]; Helen Yuan in Shanghai at [email protected]
Last Updated: October 9, 2008 06:14 EDT
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By Luzi Ann Javier and Helen Yuan
Oct. 9 (Bloomberg) -- FerroChina Ltd., a Chinese steelmaker, said it is unable to repay loans totaling 706 million yuan ($104 million) because of the ``current economic crisis,'' and a further 4.52 billion yuan in loans and notes may also be at risk.
Production at FerroChina's plants has been suspended and the mill is in talks with creditors and potential investors, the company said today in a statement to the Singapore Stock Exchange, without identifying companies.
The escalating credit crunch has toppled banks in the U.S. and Europe, frozen credit markets and slowed economic growth, curbing demand for China-made products. Steel prices and demand in China have been declining.
``The company has been having financing problems for a while,'' JPMorgan Chase & Co. analyst Zhang Qin said by phone from Hong Kong. ``It has been looking for foreign strategic investors for a restructuring.''
The company, which has a market value of S$436 million ($297 million), requested on Oct. 7 that its Singapore-listed shares be suspended from trade. The stock, which last traded at 54.5 Singapore cents, has slumped 70 percent this year.
A call to FerroChina's company secretary in Singapore by Bloomberg News was not answered.
``Due to the current economic crisis, the group is unable to repay part of its working capital loans aggregating approximately 706 million yuan which has become due and payable,'' the statement said. ``The management is seeking new equity and loan funding.''
Further loan facilities and notes of about 2.03 billion yuan and ``some other working capital loans'' totaling 2.49 billion yuan may potentially become due, it said.
Changshu Plants
FerroChina has plants in Changshu City and Changshu Riverside Industrial Park in Jiangsu province, according to today's statement. The company produced 1.65 million metric tons of steel in 2007, according to Kelly Chia, an analyst at OCBC Investment Research Pte.
``It could be because some of its customers weren't able to pay up, or the price of its products weren't enough to fund its working capital,'' Chia said by phone from Singapore.
FerroChina reported net profit more than tripled to 230.4 million yuan in the second quarter from a year earlier, according to a slides presentation from the company on Aug. 14.
``Given the weak capital market and poor economic conditions, there is no assurance that we can be successful'' in the talks with potential investors and creditors, today's statement said. The talks with would-be investors were announced in a company statement on Sept. 16.
``As a zinc-galvanizing steel sheet producer, the slowdown in building, manufacturing and home-appliance industries hurt the company's sales,'' JPMorgan Chase's Qin said.
The Chinese price of hot-rolled coil, a benchmark product, has fallen 29 percent to 4,230 yuan a ton from a record 5,957 yuan on June 5, according to Beijing Antaike Information Development Co.
To contact the reporters for this story: Luzi Ann Javier in Singapore at [email protected]; Helen Yuan in Shanghai at [email protected]
Last Updated: October 9, 2008 06:14 EDT
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