Aluminum Giant Hongqiao to Sell Shares to Cut Debt

China Hongqiao Group Ltd., one of the world’s largest producers of aluminum, is seeking to reduce its debt through the sale of HK$6.2 billion ($798 million) in new shares.

The company plans to use 70% of the sale’s proceeds — or roughly HK$4.34 billion — to reduce outstanding debts due this year, according to a filing Tuesday with the Hong Kong Stock Exchange Its total liabilities amounted to $16.6 billion at the end of June.

The remaining 30% will be used to replenish the group’s capital.

China Hongqiao Holdings Ltd., the firm’s controlling shareholder, will sell 650 million shares to investors at HK$9.60 per share, and will then buy the same amount in new shares issued by China Hongqiao Group at the same price, according to the filing.

In February, short seller Emerson Analytics accused Hongqiao Group of making misleading financial claims, which Hongqiao denied.

The aluminum company suspended trading of its stock in March for seven straight months.

Hongqiao is based in eastern China’s Shandong province, the country’s largest production base for electrolytic aluminum. But the profitability of aluminum firms has been hit by a decline in product prices, due to ongoing overcapacity.

China Hongqiao’s share price was up 0.1% at HK$10.00 as of 3 p.m. Wednesday, after falling as much as 1.4% in the morning session.

Contact reporter Pan Che (chepan@caixin.com)