FerroChina suspends operations

FerroChina has failed to repay $104million in working capital loans and suspended operations.

SINGAPORE (Reuters)  - 

Small steelmaker FerroChina said on Thursday it was unable to repay 706 million yuan ($104 million) in working capital loans and had suspended operations at its manufacturing plant in China.

In a sign the global credit crisis is spreading to the corporate sector in Asia, the Singapore-listed firm also said it has 2.03 billon yuan worth of loan facilities and notes that may become due and payable.

Other working capital loans of 2.493 billion yuan may also become due and payable, it added.

"The company is currently in active negotiations with its financial lenders," the statement said.

It did not specify the lenders involved. According to the firm's annual report, the company's principal bankers are Citibank (China), BNP Paribas, China Construction Bank and Commerzbank.

FerroChina was considered a potential takeover target for months after it appointed Merrill Lynch to look for strategic options.

Last month it said it was in talks with an unidentified potential investor which could invest in the firm.

In its latest statement, FerroChina said it is still talking to the potential investor, but added there was no assurance these talks will be successful which may leave it cash-strapped.

"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," the firm said.

It said the management is seeking new equity and loan funding to resolve the group's situation.

"But given the weak capital market and poor economic conditions, there is no assurance that we can be successful in securing such funding," it said.

FerroChina said it had temporarily halted its manufacturing operations in Jiangsu in eastern China.

Hundreds of angry workers blocked gates and entrances to FerroChina Xing Dao factories in Jiangsu province with police trying to maintain order, Chinese media reported.

Shares in FerroChina, which fell over 70 percent this year, will remain suspended until further notice, the firm added. (Additional reporting George Chen in Shanghai; Editing by Saeed Azhar; Editing by Kim Coghill)

© Thomson Reuters 2008 All rights reserved

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