Sinopec Finance to sell 4b yuan bond

PUBLISHED : Tuesday, 16 October, 2007, 12:00am
UPDATED : Tuesday, 16 October, 2007, 12:00am

Sinopec Finance, jointly owned by China Petroleum & Chemical Corp (Sinopec) and parent China Petrochemical Corp, plans to raise four billion yuan from a corporate bond sale to fund the group's expansion.

Sinopec Finance, 51 per cent owned by China Petrochemical and 49 per cent by Sinopec, hired China International Capital Corp, Bank of Communications and China Everbright Bank as its main underwriters for the three-year bonds.

The bond's interest rate will be set after the book-building process to gauge demand.

Proceeds from the sale would be used to 'support development of [China Petrochemical Corp's] core business and fund mid- to long-term investments. It can also improve the asset-debt structure and inter-group financial settlement capacity', Sinopec Finance said.

Set up in 1988, Sinopec Finance is a financial intermediary under the oil, gas and petrochemical group whose main function is to settle inter-group transactions and funnel excess cash from any one unit to those that need funding for expansion.

Many large state-owned enterprises with numerous upstream and downstream units also tend to use a special finance vehicle instead of commercial banks to reduce transaction costs and quicken turnaround time. However, the practice has drawn the ire of corporate governance activists, who argue that this would increase connected transactions and expose listed units to greater lending risks.

Sinopec Finance's net profit grew 25.3 per cent year on year to 475.55 million yuan last year, while turnover rose 18.2 per cent to 1.59 billion yuan, the circular said.

Its capital-adequacy ratio was 37.3 per cent at last year end, above the 8 per cent minimum set by the banking regulator on commercial lenders.

The firm's non-performing loan ratio stood at 0.11 per cent.