Outstanding debts at Cosco (Hong Kong) Group, the unlisted parent of red chips Cosco Pacific and Cosco International, amounted to US$1.74 billion at the end of last June, lower than the shipping sector average, the lead managers of this week's bond issue said. Of this, about half was short-term debt, while the debt to equity ratio stood at 1.7, they said. The proportion of short-term debt would fall to 30 per cent after the launch of an exchangeable bond on Monday. Cosco (HK) raised $150 million this week through an exchangeable bond issue for Cosco Pacific, arranged by Salomon Brothers International, Jardine Fleming Securities and SocGen-Crosby (Hong Kong). The proceeds will be used to refinance its bank borrowings and for working capital. The overall debt-to-equity ratio will increase to 2.2 times as more short-term debt is transferred into long-term debt. A source from the lead managers said Cosco (HK)'s debt to equity ratio was lower than the shipping sector's average of three times. He said company's overall debt to asset ratio was 49 per cent, suggesting total assets of the Hong Kong commercial arm of China Ocean Shipping Co were worth about $3.56 billion. Three of Cosco (HK)'s four subsidiaries - including the two listed arms and a freight forwarding agency - generated profits last year. Cosco Pacific was the largest contributor. The source said gearing ratios at Cosco (HK)'s two subsidiaries were, at 65 to 70 per cent, quite high. Another source said Cosco (HK) did not need to raise funds by selling assets. 'The company's financial situation is healthy and it can borrow from banks,' he said. The market expects Cosco (HK) to start another round of asset acquisitions on the mainland after the disposal of certain assets to its subsidiaries.
