China Railway suffers first-quarter loss, bond sale prospectus shows
As spin-off of Ministry of Railways readies bond sale, focus is on new borrowing cost
China Railway Corp, the spin-off from the now-defunct Chinese Ministry of Railways, suffered an after-tax loss of 6.88 billion yuan (HK$8.7 billion) in the first quarter, compared with an after-tax profit of 196 million yuan for the whole of 2012, according to its first bond prospectus.
For its bond issue, the state-owned firm plans to issue 20 billion yuan of five-year bonds to finance rail construction, the purchase of rolling stock and for general working capital.
The company, established on March 14 with a registered capital of 1.04 trillion yuan, assumed the business operations of the Ministry of Railways after it was broken up.
"If the company sustains losses in the long term, it will be difficult for them to borrow, but if people think the government will continue to support the company, it can still get debt financing," said Ivan Chung of Moody's Investors Service, an international credit rating agency.
"In the past, people saw it as part of the government, so people did not care about the financial numbers, but now they care about the financial statement and profit and losses.