The cash-thirsty Taiwan High-Speed Rail Corp (THSRC, 台灣高鐵) builder of the nation's first bullet train, got a shot in the arm yesterday as China Steel Corp (中鋼) decided to buy nearly NT$3.2 billion (US$101.45 million) worth of shares in the rail company.
In a statement sent to the Taiwan Stock Exchange, Taiwan's biggest steelmaker said it will purchase 344.08 million preferred shares of the THSRC at NT$9.30 per share.
The preferred shares are of four-year duration, starting from April 25, with an annual interest rate of 9.5 percent for the first two years and zero interest in the following two years, the statement said.
China Steel has previously invested NT$2.5 billion in the THSRC. The new plan to further invest in the THSRC was given a green light after China Steel convened a board meeting yesterday morning to discuss the matter.
With the new investment, China Steel will hold a total of 605.37 million shares, which represents 6.24 percent stake in THSRC, the statement said.
As of the end of February, Continental Engineering Corp (大陸工程) is the largest shareholder of THSRC with 720.12 million shares, or a 7.95 percent stake, while Fubon Group (富邦集團) is in second place with about 484.88 million shares, or a 5.35 percent stake, according to THSRC data.
China Steel chairman Lin Wen-yuan (林文淵) was not available for comment yesterday. But Chen Yuan-cheng (陳源成), China Steel's executive vice president, told local cable station USTV yesterday that the company expects to earn money from the interest offered by THSRC.
"The interest rate offered by the THSRC is high and thus can make money for the company," Chen was quoted as saying. Chen said the investment causes no harm to China Steel's finance as the THSRC promises to buy back the shares at the end of the fourth year at the issue price.
A Chinese-language newspaper reported earlier that Lin approved the investment plan after receiving a request from the THSRC. The report also quoted Lin as saying that the investment signals a firm move to support the nation's major transportation infrastructure. The Ministry of Economic Affairs currently holds a controlling stake of 23.3 percent in China Steel.
Fundraising has always been a headache for the THSRC's NT$460.9 billion railway project. In a bid to start up the 345km high-speed railway service by the end of October, the company has been keen to find investors from both the government and private sector, such as Formosa Plastics Group (台塑集團).
The THSRC has delayed its fund-raising scheme several times, and missed last month's target, failing to raise NT$6 billion and cannot obtain loans from its bank consortium. Although the THSRC claimed that the funds will be collected by next Tuesday, it still needs to raise another NT$7.5 billion from investors by the end of next month.
The THSRC plans to list on the stock exchange by the end of September when it issues 1.25 billion common shares at NT$10 per share. The company will issue an additional 1.25 billion common shares by the end of the year.
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