Four Rivers Investment Management Company, a joint venture between New York-based WL Ross & Co and China Baowu Steel Group, has acquired 23.5 per cent stake in Chongqing Iron & Steel Co following the successful restructuring and recapitalization of the beleaguered Chinese steel company.
The Shanghai-headquartered Four Rivers together with Chongqing Strategic Emerging Industry Equity Investment Fund invested Rmb4 billion ($615 million) of new capital in Chongqing Steel in exchange for 2.1 billion shares or 23.5 percent stake in the steel company.
“The transaction marks one of the largest bankruptcy restructuring in the sector within China and is an important first transaction for our steel focused Four Rivers fund,” commented WLR Managing Director Nadim Z. Qureshi who heads the Asian private equity activity for the firm.
The restructuring reduced Chongqing Steel’s debt burden to approximately Rmb3.5 billion, from Rmb20 billion. In a statement, WL Ross & Co said the restructuring also eliminated additional Rmb20 billion in other liabilities of Chongqing.
Following the successful recapitalization and restructuring, Four Rivers named Li Yongxiang, former head of Meishan Steel, as Chief Executive Officer and Zhou Zhuping, CEO of Four Rivers, as Chairman of Chongqing Steel.
“We believe the company is now well-positioned to meet the demands of the strong and diverse economy in the Chongqing region, said Stephen Toy, co-head of WLR and director of Four Rivers.
Four Rivers was formed last year to make investments totalling Rmb40 billion to Rmb80 billion. The fund focuses on the development of a long term plan “to enhance the commercial and environmental viability of the Chinese steel industry” by investing in underperforming steel industry assets.