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China Rongsheng to Sell Shipbuilding Business

Maritime Activity Reports, Inc.

March 17, 2015

 China Rongsheng Heavy Industries (RSHI) has entered into a memorandum of understanding (MoU) with an undisclosed third party Chinese investor to sell its onshore shipbuilding and offshore engineering business.

Both parties will further negotiate details of the deal, including the scope and list of related assets and liabilities, a stock filing of RSHI said. The MOU will remain in effect until 30 June and is likely to be extended by both parties.
China Rongsheng, which is also involved in marine engine building, engineering machinery and energy exploration, has been struggling with a heavy debt burden amid a slowdown in China's economic growth. Earlier this month, Singapore-listed Yangzijiang Shipbuilding said it had been asked by Chinese government agencies to consider taking a stake in the group.
The deal will “optimize the assets and business of the group, and divest the relevant assets and liabilities of the shipbuilding business and offshore engineering business, which shall help to ease the debt burden of the group,” it added.
Shanghai-based Rongsheng, which is China’s largest shipbuilder outside government control, has been searching for funds after orders for new ships dried up and the company fell behind on principal and interest payments on 8.57 billion yuan ($1.4 billion) of bank loans. 
Rongsheng’s struggles illustrate the difficulties shipbuilders face in competing with state-owned yards that have government backing and easier access to funds.
The decision has been triggered by a depressed shipbuilding market that has incurred considerable losses for the group’s shipbuilding operations further affecting its energy service business.
China is the world’s largest shipbuilder in terms of both the gross tonnage produced and the size of its order book, according to data from consultancy IHS Maritime. 
But the fortunes of its shipbuilders turned downward after the global financial crisis hit new orders. Despite a brief pickup in 2013, orders for new ships globally declined significantly again last year.
The group operates shipbuilder Jiangsu Rongsheng Heavy Industries, which racked up losses of CNY 3.36bn ($549m) to 30 September last year.

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