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Huarong Energy plans share issuance to reduce debts

Huarong Energy plans share issuance to reduce debts
China Huarong Energy, formerly named Rongsheng Heavy Industries, has proposed to issue new shares for subscription by its creditor banks and suppliers in an effort to mitigate liquidity pressure and reduce debts.

Huarong Energy is now proactively procuring and materialising the disposal of liabilities involving an allotment of shares to certain bank and supplier creditors to satisfy an amount of RMB17.11bn ($2.56bn) in borrowings and payables due from the group.

Hong Kong-listed Huarong Energy plans to issue up to 14,108,000,000 shares of HKD0.50 ($0.07) each at HKD1.20 per share to satisfy relevant borrowings of up to RMB14.11m due to creditor banks. It also plans to issue up to 3,000,000,000 shares at HKD1.20 per share to meet payables up to RMB3bn due to supplier creditors.

“The disposal of liabilities will enable the group to ease its debt burden immediately, enhance the flexibility of fund utilisation, improve the operation of shipbuilding business and mitigate the adverse effect of the high geariing of the group on its expansion in the energy service industry,” Huarong Energy stated.

The shipbuilder-turned-energy service provider posted a first half net loss of RMB1.93bn compared to the deficit of RMB2.04bn in the same period of last year.

The change of company name was made to reflect its shift in focus to become an energy service provider, away from the shipbuilding market which is in the doldrums.