Published October 10, 2008


CREDIT SQUEEZE
Mounting debt drives FerroChina to halt ops
It says it's in talks with lenders but gives no firm assurance of success


By LYNETTE KHOO

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FERROCHINA says it has run into working capital debts amounting to 706 million yuan (S$152 million) which have become due and payable, plus 4.52 billion yuan of loans and notes that may become due and payable.


It'll maintain share trading suspension until it works out a scheme of arrangement.








The group is in negotiations with lenders to explore various options, including refinancing, to repay the debts. 'There is, however, no assurance that such negotiations or discussions will be successful, in which event the group will not have sufficient cash to satisfy its financial obligations,' it said yesterday in a filing to the Singapore Exchange (SGX).

In view of the liquidity issues it faces, FerroChina has halted manufacturing at its factories in Changshu City and Changshu Riverside Industrial Park in Jiangsu, China.

It has also sought - and the Changshu City government has offered to provide - any assistance it may require to help preserve or safeguard its assets in China.

'The company would like to assure shareholders that management is actively seeking new equity and loan funding to resolve the group's current situation,' FerroChina said. 'But given the weak capital market and poor economic conditions, there is no assurance that we can be successful in securing such funding.'

The company said on Sept 16 that it was in serious discussions with a potential strategic investor.

It is is now engaged in discussions with other potential investors who have expressed an interest in investing.

No term sheet or definitive agreement has been signed yet.

Trading of FerroChina shares was halted on Wednesday. The counter closed 0.9 per cent lower at 0.545 cents on Tuesday.

The group said it intends to maintain the share trading suspension until it works out a scheme of arrangement for consideration by creditors and shareholders.

It has appointed Rajah & Tann its legal adviser, and will appoint a financial adviser to assist it with restructuring.

In response to media queries, an SGX spokesperson said the exchange has contacted some directors and the management of FerroChina and is 'closely monitoring the situation'.