Singapore-based Continental wants to raise US$150m through a note issue and HK listing for its plans in China Continental Chemical Holdings plans to raise US$100 million by issuing a senior unsecured note this week to fund capacity expansion on the mainland. Sources said the Singapore-based company was also considering raising a further US$50 million through a Hong Kong listing. The firm makes intermediate chemicals, mainly plasticisers and its raw material, phthalic anhydride. Plasticisers are used to make polyvinyl chloride plastic, wires, cables and synthetic leather. Continental has 30 to 35 per cent of the plasticiser and phthalic anhydride market in Southeast Asia, according to ratings agency Standard & Poor's. The company also makes speciality resins that are used to make paints, furniture, ink, packaging, textiles and adhesives. Continental, owned by five investment firms controlled by unrelated families in the United States and Asia, has production facilities in Singapore, Indonesia and Thailand, with annual capacities totalling 222,000 tonnes. A US$7 million plant expansion in Thailand and the construction of three plants in Guangdong province costing $152 million will more than double the firm's capacity to 490,000 tonnes by 2006. The mainland's low labour costs, proximity to market and raw materials make it a competitive production base. This is especially so for southern China, where a supply shortage of plasticisers and phthalic anhydride amounted to 404,000 tonnes last year, a shortfall projected to still be running at an annual 377,000 tonnes in 2006. Northern China's excess supply is projected to rise from 828,000 tonnes last year to 928,000 tonnes in 2006. According to sources, UBS is the arranger of the note issue. UBS and Continental declined to comment yesterday. To prepare for its fund-raising exercises, Continental has obtained a B-plus long-term corporate credit rating from S&P and a B rating on the proposed note. According to the ratings agency, the six-year-old chemicals producer posted a net profit of US$8 million in last year's first half, $10 million for the whole of 2002 and $3 million in 2001. Turnover was $102 million, $192 million and $166 million respectively. The agency said the rating was subject to risks from intense competition in a fragmented market. 'This is because the entry barriers are low as the production facilities can be set up at a relatively low cost and the technology is largely standardised and easily available,' S&P credit analyst Sharad Jain said, adding the risks were partly offset by Continental's large market share and the diversity in location of its facilities and markets. Continental's proposed issue would be subordinate to its mainland subsidiaries' liabilities as the notes were unsecured by assets and noteholders would probably have difficulties enforcing their creditor rights should Continental default on payment, S&P said. The company was expected to remain 'aggressively leveraged' with a debt-capital ratio of 50 per cent to 70 per cent in the medium term, it said. making money The company will issue a note to raise US$100 million this week Projects in Thailand and China will boost capacity Continental has obtained a B rating on the note from S&P
