Shipbuilder's chief owner isn't fleeing debts
Saturday, 25 February 2012 | 00:00
The local government in Yueqing, Zhejiang province, has denied rumors that the chief shareholder of Dongfang Shipbuilding (Group) Co Ltd has fled in response to pressure to pay off debts.
Officials said Chen Tongkao, the chief shareholder, was in fact absent because he is looking in Singapore for investors who can help restructure the company and that he can be reached at any time.
Before Dongfang Shipbuilding's debt troubles surfaced, it had been a star business in the city. Its shares began trading on London's Alternative Investment Market in August 2011, making it the first Chinese shipbuilder to be listed on AIM.
As the global shipbuilding industry struggles to ride out the current economic downturn, various Chinese companies in the industry are contending with a decline in demand and reduced profits.
Recent media reports alleged that Chen had furtively slipped out of Yueqing, leaving Dongfang Shipbuilding with a large amount of debt.
The city's statement denied that.
"He is seeking help from investment institutions for a possible restructuring," Yueqing's finance office said in a statement on Thursday. "During his stay in Singapore, Chen is staying in touch with the government at all times.
"Ever since the company reported that it had a capital shortage in October 2011, the leadership at Dongfang Shipbuilding has stayed in touch with government departments and banks."
After Dongfang's debt troubles became evident, the local government set up an assistance panel in November 2011 and later established a special fund of 200 million yuan ($31.7 million) to help cash-strapped enterprises such as Dongfang Shipbuilding.
The city's reply noted that Chen has a 71.4 percent stake in the company, which has debts of 1.13 billion yuan.
According to earlier reports by the 21st Century Business Herald, the company had operating revenue of $127 million in 2010 and made a pre-tax profit of $1.5 million. By the end of June 2011, the company was working to fill orders worth $89 million; the delivery date for some of those orders will come as late as January 2014.
A number of observers are taking those figures as signs that the company is not at the brink of a bankruptcy.
During the past two years, Dongfang Shipbuilding has placed a priority on restructuring itself, trying to encourage investment from private-equity companies and have itself listed overseas. Even so, the company has been harmed by poor internal management and excessive expenditure, said Yueqing city's finance office.
The office has announced various plans to bail out Dongfang Shipbuilding. The government has worked with local banks to lower the company's debt ratio, to guarantee that orders would be completed on time.
Liu Xunliang, secretary-general of the Shanghai Shipbrokers Association, said the slump in the industry may force as many as 30 percent of the small shipbuilders in the country into bankruptcy.
Source: China Daily
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