Caixin
Nov 08, 2018 07:10 PM
BUSINESS & TECH

IPO of Money-Spinning Beijing-Shanghai High-Speed Railway Steams Ahead

A passenger boards the Beijing-Shanghai high-speed rail line at the Beijing South railway station on Sept. 21. Photo: VCG
A passenger boards the Beijing-Shanghai high-speed rail line at the Beijing South railway station on Sept. 21. Photo: VCG

The operator of the Beijing-Shanghai high-speed rail has appointed underwriters for its planned initial public offering (IPO) on the mainland, Caixin has learned, as the parent China Railway Corp. (CRC) looks for money to pare down its debt.

CRC has yet to decide to take Beijing-Shanghai High-Speed Railway Co. Ltd. (BSHSR) — of which it has a controlling 46% stake — to float in Shanghai or Shenzhen, Mao Bingren, a manager for CRC’s finance and development department, told Caixin on Thursday. He said no timetable has been set for the listing.

Citic Group and China International Capital Corp. have been chosen as the two joint underwriters to manage the IPO, according to a source familiar with the matter.

The move is the latest for the state-owned railway operator to seek outside funding to pay for its massive amount of debt accumulated after years of frenzied investments in expanding the country’s railway networks. As of September, CRC reported a debt of 5.28 trillion yuan ($762.5 billion) with a debt-to-equity ratio of 65.19%.

Previously, CRC was not interested in listing BSHSR, as the Beijing-Shanghai rail line — one of the nation’s busiest — was not short of capital, a source close to CRC told Caixin in July. But CRC has now decided to use the unit as a pilot project to push forward its “asset securitization” plan amid Beijing’s national deleveraging campaign to reduce corporate debt, according to the source.

The Beijing-Shanghai rail line, which started operations in 2011, is one of the country’s few high-speed routes that have turned a profit. In 2016, BSHSR had a profit of 9.5 billion yuan, up from 6.6 billion yuan a year earlier, according to its financial reports.

CRC’s decision to float the unit was also due to pressure amounting from BSHSR’s two other shareholders — Ping An Asset Management Co. Ltd. and a national social security fund — which have a combined 20% stake in the company, Caixin has learned.

Earlier the year, CRC signed agreements with stock exchanges both in Shanghai and Shenzhen, in which they said would help CRC to carry out plans that include “bond issuance and asset securitization.”

Contact reporter Mo Yelin (yelinmo@caixin.com)

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