Asia Aluminum drops bond buy-back

Asia Aluminum Holdings, the region's largest processor of the metal, and its parent AA Investments have cancelled their joint offers to buy back US$985 million worth of high-yield bonds after a local government withdrew its support.

'The [mainland] municipal government, which previously indicated its support in providing access to financing for the tender offers ... has informed us that it has decided to withdraw such support,' the companies said in a joint statement, without naming the government.

The government's support was conditional on the completion of the bond repurchase. However, this has not happened, as the offers apparently failed to win by the March 10 first deadline the 90 to 100 per cent support from bondholders required for success.

Bondholders have complained the offers were too low. They are expected to discuss restructuring alternatives with provisional liquidator Ferrier Hodgson in a few days.

Asia Aluminum offered last month to buy back US$450 million of unsecured notes maturing in 2011 at a 72.5 per cent discount, while AA Investments proposed to buy back US$535 million of notes due in 2012 at an 86.5 per cent markdown.

The Hong Kong-based company's principal operations are in Zhaoqing, Guangdong, where it is in the final stages of building the second-phase 400,000 tonnes a year aluminium fabrication plant to add to the already operational 350,000 tonnes a year first phase.

Output was 238,700 tonnes for the year to June last year.