Fosun International, the Club Med chain of resorts owner, is nearing a deal to sell its shares in Nanjing Iron & Steel for a transaction worth USD 2.1 billion. This would enable heavily indebted group raise cash to cut down its borrowings.
The company has announced selling its Nanjing Iron & Steel assets to Jiangsu Shagang Group. Reportedly, the firms are finalizing the agreement. However, Fosun, Nanjing Iron, and Jiangsu Shagang did not comment on the deal.
The proposed sales deal follows recent reductions in Fosun’s holdings across different businesses, including its proprietary tourism and pharmaceutical units. This is also in line with the company’s attempts to raise money and pay off its debts.
As per sources, Fosun International currently owns a 58.92% equity interest in Shanghai-listed Nanjing Iron & Steel via an established JV formed with Nanjing Iron and Steel group in 2003.
For the record, Nanjing Iron & Steel noted a 44% increase in net profit to approximately USD 569 million in 2021, as stated in its annual report.
The bonds of Fosun observed a boost recently. Its senior notes maturing in July 2023 climbed to 50.78 cents on the dollar. On the other hand, another bond which is due in 2024 rose to 38.22 cents.
It is imperative to note that the company faces elevated refinancing pressure from different firms, on top of potential risks from weak affiliates exposed to the Chinese property market. As of June 2022, Fosun International had approximately $16.3 billion in cash or cash equivalent.
The firm’s total liabilities amounted to $90.5 billion, of which about 40% were interest-bearing borrowings. Moreover, Fosun has $3.9 billion worth of bonds and $4.5 billion of loans reaching maturation between July 2022 and June 2023.
Post the announcement, trading in shares of both Nanjing Iron & Steel were suspended. Besides, no other details about the transaction were disclosed.