China Hongqiao plans $800m share sale to reduce debt

Aluminium ingots are seen outside a warehouse that stores London Metal Exchange stocks in Port Klang Free Zone, outside Kuala Lumpur, March 23, 2015. REUTERS/Olivia Harris/File Photo

China Hongqiao Group Ltd , the world’s largest aluminium producer, said on Tuesday it plans to raise HK$6.24 billion ($800 million) through the sale of new shares to cut debt.

Mainland-based China Hongqiao, which has roughly $16.6 billion in liabilities, will use 70 percent of proceeds to reduce debt due this year while the rest will go towards general working capital, it said in a filing.

The firm’s controlling shareholder, China Hongqiao Holdings Ltd, will sell 650 million shares to third-party investors at HK$9.60 apiece, a 10.45 percent discount to its previous close.

The controlling shareholder will then buy the same amount in new shares issued by the company, although its stake will decline to 68.5 percent from about 74 percent.

Shares in China Hongqiao’s stock slid in morning trade but not as low as the discounted sale price, down 6.8 percent at HK$9.97.

The share sale comes after China Hongqiao was hit last year by negative research reports from a group called Emerson Analytics said the company was understating its costs and exaggerated its profits.

China Hongqiao has called the reports defamatory and in December obtained an injunction from a Hong Kong court to restrict reports by Emerson.

After being suspended from trade for much of the year, the stock rebounded to end the year up 28.3 percent, although that lagged a 36 percent rise in the benchmark Hang Seng Index

UBS AG Hong Kong Branch, CMB International Capital Ltd and CLSA Ltd are the placing agents for the share sale.