The shares of China Rongsheng Heavy Industries Group, the shipyard seeking financial assistance from the government, surged the most in more than nine months after it agreed to issue convertible bonds to raise capital.
The Shanghai-based company aims to raise a net HK$1.38 billion from selling the bonds to Action Phoenix, it said in a statement to the Hong Kong stock exchange on Wednesday. The bonds maturing in 2016 have a coupon of 7 per cent. Their initial conversion price is HK$1 a share, about 22 per cent more than Wednesday's closing price.
The country's largest shipyard outside state control said on July 5 it was seeking help from the government after a plunge in orders forced it to reduce production and "restructure" its workforce. Chinese shipmakers are struggling as a global vessel glut makes orders more difficult to win and pushes down prices.
"Rongsheng is desperate for cash as there are signs that its balance sheet is really stretched," said Lawrence Li, a Shanghai-based analyst at UOB-Kay Hian Holdings. "The much-needed money will help ease pressure, but this is far from enough."
The shares jumped 12.2 per cent to close at 92 HK cents yesterday. The Hang Seng Index rose 0.9 per cent.
Rongsheng had 28.8 billion yuan (HK$36.4 billion) of debts at the end of last year, including 19.34 billion yuan of short-term debt.