Heavy debts no problem in Tianrui's HK debut
Despite its heavy debt burden, China Tianrui Group Cement got the thumbs-up from investors yesterday on its debut, with its share price soaring 22 per cent. The mainland company plans to grow through acquisitions.
The cement producer's share price closed at a high of HK$2.94 yesterday when it started trading on the main board of the Hong Kong Stock Exchange, with 1.6 million shares changing hands.
Tianrui's offer share price of HK$2.41 was at the low end of its price range, and raised net proceeds of HK$914.6 million. The company plans to use 95 per cent of its initial public offering proceeds to repay debts to JP Morgan and International Finance Corporation (IFC), a member of the World Bank, according to its prospectus.
Tianrui had previously breached debt covenants with JP Morgan and IFC, but said that on Tuesday it had obtained waivers from the breaches. IFC has lent US$50 million to Tianrui, which also has a 1.68 billion yuan credit facility from JPMorgan.
'We will definitely repay our bank loans on time,' Tianrui executive director Liu Wenying said during its listing ceremony yesterday.
But, the prospectus warned, the group was 'highly leveraged, and our business could be adversely affected by our indebtedness'. As of June 30, the company's borrowings totaled 5.38 billion yuan and its gearing ratio was 57 per cent.
Tianrui would raise more funds through issuing new shares and bonds, as well as through bank borrowings, Liu said. It also planned to acquire other cement companies.
Tianrui has an unused credit facility of 2.8 billion yuan, Liu said. 'The government supports our growth, so banks will finance us.'
Meanwhile, SPT Energy also made its debut on the HKEx main board yesterday, when its share price rose to HK$1.25 from its offer price of HK$1.23. The private mainland provider of oilfield services raised HK$349.4 million net proceeds from its IPO, and 15 million SPT shares changed hands. SPT would make acquisitions in China and overseas, chairman Wang Guoqiang said, without elaborating.