China Fibretech signs up for 100m yuan infrastructure investment

SINGAPORE-LISTED troubled dye maker China Fibretech has entered into an agreement to invest 100 million yuan (S$21 million) in a China-based company incorporated for the purpose of investing in and building a rural road project in Xingwen county.

The deal signed with Yibin Highway & Bridge Construction Co (Yibin H&B) on Mar 28 will see China Fibretech pick up a 90.91 per cent equity stake in Bo Dao Road Construction Co.

Yibin H&B is 96.50 per cent owned by Ding Neng Group and 3.5 per cent owned by the Yibin City government.

The said project is valued at 550 million yuan and involves the construction of 220 kilometres of rural roads comprising about 30 road parcels for the Xingwen county government. The project, which commenced in the first quarter of 2017, is expected to complete no later than end-2019.

The Xingwen county government will make progressive payments for the construction costs with returns of 8.8 per cent per annum within the next 10 years upon the completion of the construction of each road parcel.

Presently, Bo Dao has completed about 30 per cent of construction works. The project is moving on schedule but Bo Dao has not completed any road transfer to the Xingwen county government.

China Fibretech said that the proposed acquisition is in line with its plan to expand its business, including infrastructure projects. The listed company intends to draw on the proceeds from the placement of new shares for its investment in Bo Dao.

On Monday, the company announced the proposed placement of over 50 million new shares at 60 Singapore cents to six subscribers, China Capital Investment Group, Asia Hausse Investments Pte Ltd, Newsome Holdings Limited, Carol Choong, Wayman Holdings Limited and Su Wan Ru.

After the proposed share placement is completed, the six subscribers will hold significant equity interests ranging from 4.54 per cent to 24.53 per cent in China Fibretech.

The company said that about 73.6 per cent of some S$29.9 million of net proceeds from the placement of new shares will fund its investment in Bo Dao.

The proposed share placement will raise China Fibretech's issued and paid-up share capital to 67.95 million ordinary shares.

Trading of China Fibretech shares has been suspended since November 2015. The board of the mainboard-listed dye maker has undergone major reshuffling following regulatory probes into payments made to three customers who allegedly suffered damages and financial losses totalling about 470 million yuan.