WCC West China

 

TIDMWCC 
 
RNS Number : 2075B 
West China Cement Limited 
22 October 2009 
 
 
 
West China Cement 
 
 
Proposed Hong Kong Listing; 
Redemption of Warrants; and 
US$50m Loan Facility 
 
 
22 October 2009 
 
 
West China Cement Limited (the "Company"), the AIM listed cement producer and 
distributor located in the Shaanxi province of the People's Republic of China, 
is delighted to announce that the directors have decided to commence works 
relating to the Listing of the shares of the Company on the Main Board of the 
Hong Kong Stock Exchange. A Board meeting will be held in November in Xi'an to 
determine the choice of advisors. 
 
 
In preparation for the proposed Listing, the Company has on 21 October 2009 
executed a Deed of Amendment relating to the Warrant Instrument entered into 
with Credit Suisse as part of the financing package agreed on 29 May 2008 (the 
"Amendment Deed"). 
 
 
Pursuant to the Amendment Deed, the Company shall redeem all of the outstanding 
7,802,142 Warrants issued to the consortium led by Credit Suisse at a Settlement 
Price of US$6.5608, being GBP4.00 converted at 1.6402. This compares with the 
Warrant exercise price of US$2.6916. The Settlement Price is equal to a 10% 
discount to yesterday's closing price of GBP4.45. The total Redemption Amount is 
US$30.2 million, payable in three instalments: 10% on the signing of the 
Amendment Deed; 50% on 15 December 2009; and the remaining 40% on 31 January 
2010. Interest of 5% is payable on the outstanding Redemption Amount. The 
redeemed Warrants will be cancelled and will not be available for reissue or 
resale. 
 
 
In conjunction with the Amendment Deed, the Company has also entered into a 
bridging loan facility of US$50 million with an associate company of ICBC 
International (the "ICBC Facility"). The funds raised are to finance the Warrant 
Redemption and for general working capital purposes. Interest payable under the 
Facility is at LIBOR+5% per annum. The ICBC Facility is due for repayment 9 
months from the date of the utilisation or immediately upon the Company's 
successful Listing on the Main Board of the Hong Kong Stock Exchange, whichever 
is earlier. 
 
 
The ICBC Facility is secured by a charge over 19,393,776 ordinary shares of the 
Company, held by Mr. Jimin Zhang, the Chief Executive Officer and majority 
shareholder, which amounts to 29.9% of the total shares in issue. 
 
 
The Redemption will result in a charge of US$21.1 million in 2H09, and a total 
charge of US$30.2 million for the financial year. It should be noted that, in 
accordance with previous reporting periods, had the Company not redeemed the 
warrants, a charge would have been accrued in accordance with International 
Financial Reporting Standards ("IFRS") treatment for embedded derivatives at the 
end of the Company's current reporting period. As an indication of the quantum, 
if the Company's mid-market closing price at the period end equalled yesterday's 
closing price, the charge in 2H09 would have equalled US$29.2 million, resulting 
in a full year Income Statement charge of US$33.5 million. 
 
 
The directors believe that the redemption of these Warrants secures the long 
term interest of the Company and its shareholders. It not only facilitates the 
Listing but it also removes the share price risk, the effect of volatility on 
earnings in future periods and the possibility of dilution at a low share price. 
As previously announced, the strike price of the Warrants was subject to annual 
price reset under certain circumstances, and the warrant holders could opt for 
either a share settlement option or cash settlement option. The former would 
dilute the interests of the existing shareholders while the latter would exert 
an uncertain and potentially high pressure on the Company's liquidity. The 
Redemption removes these risks. 
 
 
In addition, under IFRS the cash settlement option is classified as a financial 
liability at "fair value through profit or loss". This derivative therefore has 
the potential to bring volatility in the future periods' earnings as there could 
be significant movements in the fair value of the financial liability. The 
Redemption removes this uncertainty. 
 
 
Commenting on the decisions, Jimin Zhang, WCC's Chief Executive Officer, said: 
 
 
"It was not an easy decision for the Board when entering into the financing and 
warrant agreements 16-months ago. But the construction of Ankang and, 
thereafter, the two Hanzhong plants have proven that we had made the right 
decision at a challenging time. Today, it was an easier decision to release the 
Company from the obligations relating to these warrants, which would otherwise 
have left the Company exposed to either substantial dilution or financial cost. 
 
 
"The latest arrangements provide a kick start to our Hong Kong listing 
process. We aim to be listed on the Main Board of the Hong Kong Stock Exchange 
before 30 June 2010." 
 
 
Robbie Robertson, Chairman of WCC, said: 
 
 
"I mentioned at the time of the interims that we felt that the Company had grown 
to the extent that we should consider the options of re-listing on the Main 
Board in London or Hong Kong. After careful consideration, we believe that the 
Company will be better positioned and understood in Hong Kong, where a number of 
other Chinese cement companies are currently listed. The AIM market has served 
the Company well in helping to finance its growth from a small company to a 
regional leader which next year should produce about 7.5million tonnes of cement 
- not far off current UK cement demand. We believe Hong Kong will better 
facilitate the Company's further growth. We will also be considering whether it 
is appropriate to retain a listing in London." 
 
 
 
 
For further information, please contact: 
West China Cement Limited 
Po Ling Low Tel: +86 139 1088 6649 
 
 
NCB Stockbrokers Ltd 
Christopher Caldwell Tel: + 44 20 7071 5200 
 
 
Citigate Dewe Rogerson Asia 
Pui Shan Lee Tel: + 86 21 6340 4186 / Mob: + 86 138 1712 5781 
ps.lee@citigate.com.cn 
 
 
 
 
Notes to Editors: 
 
 
West China Cement listed on the AIM market of the London Stock Exchange on 4 
December 2006, raising approximately GBP20.1 million net of expenses. 
 
 
Prior to the listing, the Company, which is headquartered in Xi'an the 
provincial capital of Shaanxi Province, had operated three cement production 
plants in Pucheng with a combined production capacity of 1.5 million tonnes per 
annum since 2003. 
 
 
In order to service the growing demand for cement in the region, a new plant 
running two cement production lines, funded by money raised at the IPO, opened 
in Lantian in 2007 and has a production capacity of 2 million tonnes. 
 
 
On 29 May 2008, the Company entered into a US$60 million loan agreement with 
Warrants to finance the third production plant. This 1.8 million tonne plant at 
Ankang started producing and selling cement in March 2009 and is expected to 
reach full capacity in the second half of 2009. 
 
 
Approval for the building of two new cement plants, Yangxian and Mianxian, each 
with a capacity of 1 million tonnes per annum, was announced in March 2009. With 
the massive government spend on infrastructure as part of the RMB 4 trillion 
fiscal stimulus package and the need to rebuild in the wake of the Sichuan 
earthquake which occurred in this area, the Company has chosen the appropriate 
location to build these latest projects. 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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