SHANGHAI :
China’s Tianqi Group Pares More Equity in Debt-Laden Lithium Unit as Default Looms
Xu Wei
DATE:  Nov 25 2020
/ SOURCE:  Yicai
China’s Tianqi Group Pares More Equity in Debt-Laden Lithium Unit as Default Looms China’s Tianqi Group Pares More Equity in Debt-Laden Lithium Unit as Default Looms

(Yicai Global) Nov. 25 -- China’s Tianqi Group, majority shareholder in Tianqi Lithium, has discreetly reduced its stake in the struggling lithium producer by another 1 percent in the last week as the unit warns that there is a danger of it defaulting on a USD1.9 billion debt due at the end of the month.

The Chengdu-based parent firm did not reveal the price of the sale but the reduction is part of a plan first announced in May, Tianqi Lithium said yesterday. The group declared on May 19 that it is preparing to offload 6 percent of the unit's stock in the six months starting from July 3. In the five months to Nov. 16, it had already reduced its holdings by 4.3 percent, cashing in CNY1.4 billion (USD212.5 million).

Once complete, Tianqi Group will be left with a 30.66 percent stake.

Tianqi Lithium, China’s biggest lithium extractor, a material used to make electric car batteries, has been facing plunging earnings as lithium prices dive. Net profit plummeted nearly 10 times in the nine months ended Sept. 30 from the same period last year to a gaping loss of CNY1.08 billion (USD164 million), according to the company’s third quarter earnings report. Revenue was down 36 percent to CNY2.4 billion.

As a result, the lithium maker is unable to repay part of a USD3.5 billion syndicated loan that it took out from China Citic Bank in 2018 to purchase equity in the world’s biggest lithium producer, Chile’s Sociedad Quimica y Minera.

Tianqi Lithium, which had net assets of CNY8 billion (USD1.2 billion) as of Sept. 30, will also suspend interest payments on the loan for the rest of the year, it said on Nov. 13. Unpaid interest so far comes to CNY471 million (USD71.6 million).

Both Tianqi Lithium and the parent firm have been actively looking for investors, but no deals have materialized yet, the unit said.

Tianqi Lithium’s stock price [SHE:002466] has been behaving quite erratically. It plunged almost 8 percent to CNY22.69 (USD3.45) on Nov. 16 after warning of a default but has since picked up quite considerably, hitting the upper limit of 10 percent twice in the past week. Today it closed down 1.5 percent at CNY26.94 (USD4).

Editor: Kim Taylor

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Keywords:   Tianqi Lithium Corporation,Stock,Reduce holding