just in in-tray
The number of China parties walking away from contracts will increase
rapidly from here, as in past...
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FerroChina `Insolvent,' May Sell at Discount, OCBC's Chia Says
2008-10-10 02:08:06.710 GMT
By Jake Lloyd-Smith
Oct. 10 (Bloomberg) -- FerroChina Ltd., a Chinese steelmaker unable to pay its debt, may be worth 28 percent less than its last traded share price if the mill attracts a strategic investor for a rescue, according to OCBC Investment Research Pte.
``FerroChina is technically insolvent,'' Kelly Chia, an OCBC analyst wrote in a report dated today as the Singapore brokerage suspended coverage of the company. The loans it can't pay ``are primarily from Chinese banks,'' Chia wrote.
The mill yesterday blamed the ``economic crisis'' for not
being able to pay 706 million yuan ($104 million) in loans, and
said a further 4.52 billion yuan in loans and notes may also be
at risk. Output has been halted at its plants in Jiangsu province and FerroChina is in talks with creditors and potential investors.
If a so-called white knight were to rescue FerroChina,
paying 40 percent to 50 percent less for a stake than the
company's net assets were worth in the first half, FerroChina may be valued at 39 Singapore cents to 46 cents a share, Chia wrote in the report.
The stock, which is listed in Singapore, was suspended from trade from Oct. 8 at 54.5 cents, valuing the Changshu, Jiangsu-based company at S$436 million ($295 million). The shares have slumped 80 percent over the past year.
The escalating credit crunch has toppled banks in the U.S.
and Europe, frozen credit markets and slowed economic growth,
curbing demand for China-made products. Steel prices and demand
in China have been declining.
``We are trying to get further updates from management,''
Chia wrote. The steelmaker's failure to pay the loans may have
been caused by customers not being able to pay for orders or a
slump in sales, the analyst said.
Calls to FerroChina's offices in Singapore and its China
headquarters weren't immediately returned.
--With reporting by Helen Yuan in Shanghai. Editors: Teo Chian
Wei, Tan Hwee Ann.
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