
China’s largest state-owned potash producer in trouble after it fails to raise funds in the fifth bid
- Qinghai Salt Lake Potash Co. fails to raise funds in its fifth round of auction.
- The company halted trading its shares in November following its filing for bankruptcy in September.
- Qinghai's total assets were valued at $3.64 billion while the opening price for the auction was announced at $612.05 million.
- Sinochem Group is one of the leading investors in Qinghai Salt Lake Potash Co.
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China’s largest state-owned potash producer, Qinghai Salt Lake Potash Co., failed to raise funds in its 5th round of auction. Following its failure to sell the assets, the company seems to have lost its last hope of avoiding delisting from the Shenzhen Stock Exchange.
Qinghai Reported Net Losses For Two Consecutive Years
Copy link to sectionFollowing net losses for two consecutive years (2017 and 2018), analysts had expected it to be taken down from the stock exchange if it posts net loss for the third year in a row.
Consequently, the state-owned potash producer announced in November that its shares will no longer be available to trade as it filed for bankruptcy in September with the Qinghai province court. The company was provided with some support when the court accepted a creditor’s request to restructure the firm after its debt-to-equity ratio exceeded 200% and it defaulted several payments.
A 24-hour auction was held on China’s Taobao e-commerce list on which Qinghai Salt Lake’s equity, inventories, and fixed assets were listed for sale. Debt receivables, as well as shares of the company’s two prominent subsidiaries, were also reported to have been on sale on Wednesday. As per the listing, the total assets of the company were valued at 25.425 billion yuan ($3.64 billion). However, the opening price was announced at a much lower 4.27 billion yuan ($612.05 million).
According to the company’s regulatory filing last month, it was unable to interest the bidders in four of its auctions prior to Wednesday. The result of the fifth auction earlier today, however, was not any different with the company failing to attract any major bidders this time either.
Sinochem Group Is The Leading Investor In Qinghai Salt Lake Potash Co.
Copy link to sectionAccording to CRU International’s senior analyst for Potash, Humphrey Knight:
“Should the company be forced to file for bankruptcy protection, we don’t believe this would materially impact its potash business. However, if this did result in a slowdown in Qinghai Salt Lake’s potash production then this would hand the advantage to overseas producers as it could increase China’s dependency on potash imports. China relies on imports of potash, widely used as a fertilizer, for about half of its total annual demand.”
One of the most prominent investors in Qinghai Salt Lake Potash Co. is the Sinochem Group that specializes in the production and trading of oil and various chemicals.
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