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Friday 10 October 2008
FerroChina Unlikely to Find Strategic Investor – DMG
The Singapore-listed FerroChina is unlikely to find a strategic investor capable of rescuing it from its financial problems, and it could be facing liquidation, DMG said in a note. PDF
FerroChina Unlikely to Find Strategic Investor – DMG
(XFN-ASIA) - The Singapore-listed FerroChina is unlikely to find a strategic investor capable of rescuing it from its financial problems, and it could be facing liquidation, DMG said in a note.
FerroChina suspended its shares from trade on Wednesday and has since closed down some of its plants, saying that it is looking for alternative sources of financing in order to help pay matured debts of 706 mln yuan.
However, DMG and Partners Securities said that it is leaning towards “the worse-case scenario that the chance of the strategic investor deal coming through is extremely slim in the short to medium term.”
The Ministry of Commerce is also showing no signs of approving ongoing takeover proposals involving Chinese steel firms, it said.
“Coupled with the current global economic gloom, the potential strategic investors may be having financial problems of their own and may end up pulling out totally from the proposed deal altogether,” DMG added.
It said that if current rescue plans fail, a “white knight” investor could eventually come in and help the company restructure along the lines of China Aviation Oil, also listed in Singapore, which was crushed by a derivatives trading scandal in 2004.
It also said that FerroChina could be able to find extra credit to pay off its immediate debt obligations, allowing it to continue negotiations on other loans.
DMG also noted that the company has been offered support by the municipal government of Changshu, where it is based.
DMG added that it would write down goodwill to zero if in the “worst case scenario” FerroChina has to be liquidated. Accounting for cash balances as of the end of the first half and a fire-sale of fixed assets to repay debts and square receivables against payables, it estimates net tangible assets of the company at less than 0.50 sgd a share.
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FerroChina Unlikely to Find Strategic Investor – DMG
(XFN-ASIA) - The Singapore-listed FerroChina is unlikely to find a strategic investor capable of rescuing it from its financial problems, and it could be facing liquidation, DMG said in a note.
FerroChina suspended its shares from trade on Wednesday and has since closed down some of its plants, saying that it is looking for alternative sources of financing in order to help pay matured debts of 706 mln yuan.
However, DMG and Partners Securities said that it is leaning towards “the worse-case scenario that the chance of the strategic investor deal coming through is extremely slim in the short to medium term.”
The Ministry of Commerce is also showing no signs of approving ongoing takeover proposals involving Chinese steel firms, it said.
“Coupled with the current global economic gloom, the potential strategic investors may be having financial problems of their own and may end up pulling out totally from the proposed deal altogether,” DMG added.
It said that if current rescue plans fail, a “white knight” investor could eventually come in and help the company restructure along the lines of China Aviation Oil, also listed in Singapore, which was crushed by a derivatives trading scandal in 2004.
It also said that FerroChina could be able to find extra credit to pay off its immediate debt obligations, allowing it to continue negotiations on other loans.
DMG also noted that the company has been offered support by the municipal government of Changshu, where it is based.
DMG added that it would write down goodwill to zero if in the “worst case scenario” FerroChina has to be liquidated. Accounting for cash balances as of the end of the first half and a fire-sale of fixed assets to repay debts and square receivables against payables, it estimates net tangible assets of the company at less than 0.50 sgd a share.
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