Dalian: Rongsheng Heavy Industries, once the largest private shipbuilder in China, now on the verge of bankruptcy, has found salvation. A deal to save Rongsheng is expected to be hammered out early next week. Splash understands that Yangzijiang Shipbuilding and a trio of banks will step in as white knights to keep the huge yard going. The news follows the cancellation of an RMB510m investment deal for the yard as the main investor Wang Ping, was arrested by authorities last week.
According to an industry source, Yangzijiang Shipbuilding will acquire 20% equity in the financially troubled shipyard, three banks coordinated by the Jiangsu government, namely Minsheng Bank, China Everbright Bank and China Development Bank, will together acquire 40% equity, Rongsheng’s founder Zhang Zhirong and some major shareholders of the yard will occupy 20% equity, and the remaining shares will be taken by smaller investors.
In a release on Tuesday, Yangzijiang Shipbuilding admitted in relation to Rongsheng: “Yangzijiang has been approached by relevant government agencies and companies to explore the possibilities for Yangzijiang to consider an acquisition of some stake in the said company.” The following day Rongsheng announced, via the Hong Kong Stock Exchange, plans for an imminent “substantial disposal”.
Rongsheng is weighed down by debts believed to be more than $3bn.
“Given the current market situation, seeking help from the government seems to be the only viable solution for Rongsheng,” an official from the China Association of the National Shipbuilding Industry (CANSI) told Splash.
Last year, it was reported that state run shipbuilding group CSSC had intentions to take over the yard, however, the potential deal has since gone quiet.
Among the three banks, Minsheng Bank has the most business involvement with Rongsheng. Its financial leasing arm, Mingsheng Leasing, had ordered more than 30 vessels in total at Rongsheng. Jiangsu Rongsheng Investment also purchased 500m shares in Minsheng Bank for RMB2.28bn in 2011.
CDB has been providing financial support to Rongsheng in the past few years. It granted a credit facility of RMB35bn to Rongsheng in 2011 and it was in the group of banks that signed an agreement with Rongsheng in 2014 to extend the debt repayment and renewal terms to the end of 2015.
News that Rongsheng is to be kept going as a functioning shipyard has not been met with universal approval from owners desperate to see China’s excessive yard capacity cut back. One owner implored Splash earlier this week, “Please can they close Rongsheng once and for all.”