Liaoning Province-based Chinese steelmaker Bengang Steel Plates Co., a subsidiary of Benxi Iron and Steel (Group) Co., has announced it has halted its private placement of A shares.
In May 2011, Bengang Steel Plates had initiated its non-public A share issue plan, aiming to issue not more than 543 million A shares at RMB 6.95 per share ($1.13 per share), with a total value of RMB 3.774 billion ($615.7 million). According to the plan, RMB 1.55 billion ($252.9 million) of the proceeds would be used to purchase the 75 percent stake in the Bengang POSCO joint venture held by Bengang Group, RMB 1.3 billion ($212.1 million) would be used to purchase exploration rights for the Xujiabao iron ore project, and the remaining RMB 850 million ($138.7 million) would be used to supplement Bengang Steel Plates' working capital.
However, in May last year Bengang Steel Plates reduced their estimate for the proceeds from the share issue to RMB 3.488 billion ($569 million) due to the ongoing decline in its share price. According to regulations set by China's State-owned Assets Supervision and Administration (SASAC), the price of additional issued shares should not be below the company's net asset value per share of RMB 4.95 ($0.81). The share issue has now been halted as the company's share price has continued to decrease and has nearly always been below the net asset value per share against the background of sluggish demand in the steel markets and negative conditions in the Chinese stock market.