China’s Valin Steel to reduce debts via debt for equities
The debt-for-equity plan involves a total amount of Yuan 3.3 billion ($478 million) and Valin’s three subsidiaries - Hunan Valin Xiangtan Iron & Steel Co, Valin Lianyuan Steel, and Hengyang Valin Steel Tube Co, and all the six creditors are all financial institutions, with government backgrounds.
With the efforts, Xiangtan’s debt-asset ratio will be reduced to 59.53% from 64.98%, Lianyuan down to 71.19% from 76.29%, and Hengyang down to 85.57% from the present 91.01%, according to Valin Steel, explaining that this is to carry out Beijing’s call for Chinese enterprises to reduce their debts.
The debt-for-equity plan will not threaten Valin’s position as the controlling shareholders of the three steel producers, though the shares will drop to 84.84% in Xiangtan, 54.27% in Lianyuan, and 55.65% in Hengyang after the proceedings, according to the disclosure.
Valin Steel has been progressing with decreasing its debt-asset ratio, and by the end the third quarter, the proportion was down to 71.08% from the 82.08% a year ago, according to the company’s release.
Not only Valin Steel, China’s entire steel industry is under the persistent pressure to reduce its debt-asset ratio to avoid systematic risks and guarantee a healthy development, and as of the Q3, the ratio was down to 66.11%, according to the China Iron & Steel Association, which was still a big gap from target set in March 2017 to bring it down to 60% in three-five years.
Earlier on December 3, Valin Steel also disclosed its plan to acquire a power generation house from the parent company at Yuan 7 billion either via cash or issuing new shares.
This is a win-win solution as Valin Group will still maintain most of crucial assets in the listed company, further strengthening the competitiveness of the latter, and the debt-asset ratios will be cut substantially, according to a Shanghai-based stocks analyst.
Valin Steel, a top steel mill in China, is operating a total of 15.5 million tonnes/year of ironmaking and 17.6 million t/y of steelmaking capacity mainly from its three core subsidiaries with essential steel products being medium plates, hot-rolled coils, cold-rolled coils and seamless pipes.
Written by Venus Wang, wangyi@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com
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