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Jiangxi Hongdu to raise funds through private placement

By Tong Hao (China Daily)
Updated: 2009-07-31 08:00

Jiangxi Hongdu Aviation Industry Co, an aircraft and parts maker, plans to raise as much as 2.5 billion yuan through a private placement of shares to strengthen its competitiveness in aircraft exports and outsourcing services, the company said yesterday.

The Shanghai-listed company plans to issue up to 106 million shares at not less than 23.78 yuan ($3.48) per share, aiming to raise not more than 2.5 billion yuan. There are around 10-targeted investors in this private placement, including AviChina Industry & Technology Co, which controls 55.29 percent of Jiangxi Hongdu and other institutional and individual investors.

AviChina will acquire shares worth 250 million yuan for cash. After the placement, the State-run aircraft maker will remain the controlling shareholder of Jiangxi Hongdu, the company said in a statement.

In line with China's efforts to develop the aviation industry, the company hopes to expand its production line, enrich product models and improve technologies against global competition through the private placement.

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Of the funds raised, 550 million yuan would be used to buy assets from affiliate company Hongdu Aviation Industry Group. In addition, 789 million yuan will be used to upgrade training aircraft for export, 304 million yuan to improve technologies to win outsourcing orders and 329 million yuan to fund research and development of high-end corporate jets.

Jiangxi Hongdu said it would build a new plant to produce a L15 model training aircraft. The plant will make 10 such aircraft every year for exports. New equipment will be purchased for technological improvement to win outsourcing orders such as airplanes' noses, wings and doors.

The company will also speed up development of advanced jets to meet the growing demand from domestic enterprises and individuals for timely and private aviation services. The new plant will start production in seven years.

Trading of Jiangxi Hongdu's shares was suspended on July 22 because of the private placement. The company said the placement has to be approved by the authorities and the general meeting of its shareholders.

Net profit of Jiangxi Hongdu decreased by 11.31 percent year-on-year in 2008 to 102.89 million yuan. On July 20, the company said in an unaudited statement that its net profit would continue to slump by 40 percent or so during the first six months in 2009 to 38 million yuan.

The government and enterprises have been quickening the steps to develop the aviation industry in recent years. An assembly line of Airbus A320 was set up in Tianjin in 2006 and the first A320 assembled in China was delivered three years later.

Besides, the country has also taken the initiative to develop home-made airplanes. Domestic media reported that as much as 200 billion yuan would be invested in the project.

In May 2008, Commercial Aircraft Corporation of China Ltd was established in Shanghai. In November of the same year, the first self-developed regional jet ARJ21-700 completed its maiden flight. Currently, the ARJ21-700 jet has received nearly 200 purchase orders.