SHANGHAI Chinese steelmaker Chongqing Iron & Steel Co warned late on Thursday that its plans to sell off debt-ridden iron and steel assets faced "uncertainties" and might not go ahead, saying trading in its shares would remain suspended.
It didn't say when it expected a restart in trading of shares that have been suspended since June last year, after it suffered net losses of almost 6 billion yuan ($872 million) in 2015. The firm has blamed its predicament on the downturn in the economy, severe industrial overcapacity, soaring labor costs and persistently low steel prices.
The company warned in a notice posted to the Hong Kong Stock Exchange on Thursday that a proposed restructuring plan that would enable it to exit the steel industry entirely and shift to more lucrative sectors like finance might not satisfy regulatory requirements. Chongqing Iron & Steel had a market value of about $1.6 billion when shares last traded, according to Thomson Reuters data.
The firm announced last August that it intended to sell all its steel assets to the Yufu Group, an entity run by the local Chongqing city government. It then hoped to acquire high-quality assets in the financial and industrial investment sectors from Yufu.
But it said on Thursday that the steel assets "involve large scale of debt with numerous creditors and complex liabilities associated with litigations", adding that it was still unclear whether the proposed transactions would proceed.
"There is also fairly great uncertainty in whether agreement can be reached with the main creditors on the intended disposal plan," it warned.
(Reporting by David Stanway; Editing by Kenneth Maxwell)