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Chalco tackles debt, brings in investors
Posted on Tuesday, 05 December 2017 10:29
Aluminium Corporation of China (Chalco) is introducing eight investors into four wholly-owned alumina, electrolytic aluminium and bauxite subsidiaries in a debt-for-equity swap worth a combined CNY 12.60 billion (USD 1.90 billion).
China’s second-largest aluminium smelter operator is trying to grapple with a high consolidated gearing of 72.0 per cent, which has hampered efforts to provide additional equity capital contributions in the short term.
With a ratio above the levels of industry peers, the corporation has decided to open up the shareholder base of four of its subsidiaries in order to gain traction on attempts at improving capability and profitability.
Through the capital contributions, Chalco will be able to pay off debt and cut its own consolidated gearing to 66.0 per cent while keeping in with the party line regarding corporate deleveraging and reducing costs.
Another financial benefit of reducing the size of interest-bearing liabilities include an increase in net profit by roughly CNY 300.00 million.
One of the incoming investors is Huarong Ruitong Equity Investment Management, which was specifically launched by state-owned distressed debt manager China Huarong for doing debt-to-equity swaps.
Backers also include China Life and China Pacific Life, the investment arms of Bank of China, Industrial and Commercial Bank of China and Agricultural Bank, China Cinda, and a unit of Shenzhen China Merchants-Ping An Asset Management.
Chalco intends to sell 30.8 per cent Chalco Shandong for CNY 1.79 billion; 36.9 per cent of Zhongzhou Aluminum for CNY 2.40 billion; and 25.7 per cent of Baotou Aluminum for CNY 2.64 billion.
A deal for Chalco Mining is structured slightly differently but ultimately features the sale of 81.1 per cent for CNY 5.77 billion, which should bring the subsidiary’s gearing down from almost 91.0 per cent to 25.9 per cent.
Chalco will end up owning 69.2 per cent. 63.1 per cent, 74.3 per cent and 18.9 per cent of Chalco Shandong, Zhongzhou Aluminum, Baotou Aluminum and Chalco Mining, respectively.
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