Thursday 9 October 2008

FerroChina Says Can’t Repay Loans, Blames ‘Crisis’

FerroChina Ltd., a Chinese steelmaker, said it is unable to repay loans totalling 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.
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Guanyu said...

FerroChina Says Can’t Repay Loans, Blames ‘Crisis’

By Luzi Ann Javier

Oct. 9 (Bloomberg) -- FerroChina Ltd., a Chinese steelmaker, said it is unable to repay loans totalling 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.

FerroChina is in talks with creditors and potential investors, the company said today in a statement to the Singapore Stock Exchange, without identifying companies. Production at its plants in China has been suspended, the statement said.

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.

“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.”

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.

As a result of the failure to repay the 706 million yuan, 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.

“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, the statement said.

FerroChina reported net profit more than tripled to 354.2 million yuan in the second quarter from a year earlier, due to expansion of its factories, according to a statement to the stock exchange on Aug. 15.

In the same earnings statement, the company said it “continues to ply on its debt in foreign currency to capitalize on the appreciating renminbi.” The yuan is also known as the reminbi.