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SCMP Reporter

H share China Shipping Development has raised $380 million through a share placement to fund a 1.4 billion yuan (about HK$1.3 billion) acquisition of 19 oil tankers from parent China Shipping (Group).

 The move forms part of the company's plan to strengthen its oil transportation business.

 China Shipping Development, formerly Shanghai Hai Xing Shipping, placed 216 million new H shares at $1.76 each yesterday through BNP PrimeEast Securities.

 Another $492 million will be paid by issuing 280 million A shares at the same price to China Shipping (Group), which will maintain a 56 per cent stake.

 The company will owe the parent the outstanding amount which will be paid next year, plus interest.

 The issue price, at an 11 per cent discount to the stock's Wednesday closing of $1.98, compared against a peak of $8.50 last August. Its shares were suspended yesterday and will resume trading today.

 The stock's price soared more than 10 times last year on a buying frenzy sparked by asset-injection hopes, despite the company's loss-making shipping operation.

 Company secretary Ye Yumang said China Shipping Development's fleet of oil tankers would increase to 69 after the acquisition.

 'We believe the purchase will enhance the company's return because it can account for the full income that will improve its cash position,' he said.

 'If it manages the tankers, it will only receive some management fees.'  Analysts said the company would benefit from the mainland's crude oil import growth and the sector's stringent entry barriers.

 'It is positive because tanker freight rates are higher than coal freight rates,' one analyst said.

 Although the company will face higher depreciation charges after the purchase, the analyst said: 'Hopefully, there is net contribution to its bottom line.'  But some voiced concern that the freight rate would be under pressure because of the regional economic slowdown.

 In October, the company's shareholders approved an issue of 20 per cent each of its H-share and A-share equity for raising funds.

 The placement, which had the potential to raise $1.5 billion at that time, was shelved after the Asian financial turmoil.

 The company will apply for another share issuance quota from the China Securities Regulatory Commission to pave the way for further fund raising.

 It is understood that it intends to acquire more oil tankers from its parent.

 The 19 oil tankers, with a total capacity of 550,000 dead-weight-tonnes, are among the 43 managed by the company in a deal struck with the parent last month.



China Shipping placement raises $380m for 19 tankers