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Railways Ministry to issue $3b commercial papers

(People's Daily)

10:20, August 08, 2011

China's Ministry of Railways will issue 20 billion yuan ($3.1 billion) of super short-term commercial papers (SCP) with a maturity of 90 days on Monday, a bond depository and settlement agency has announced.

The ministry will use the funds to be raised to build railways, buy locomotives and improve liquidity, according to a note on the website of the China Central Depository and Clearing Co Ltd (CCDC).

The papers will be offered by tender on the inter-bank bond market, with the China Development Bank and the China Construction Bank as lead underwriters.

The coupon rate will be determined through bidding, said the CCDC.

The papers will be the fourth batch of its kind issued this year by the ministry, which has been investing heavily in recent years to fund China's expanding rail network.

In July, the ministry issued 20 billion yuan of one-year commercial papers with a coupon rate of 5.18 percent, but only 18.73 billion yuan of the total was bought.

Analysts said it has become more difficult for the ministry to borrow money because of inadequate market liquidity and concerns over the ministry's debt burden.

The ministry's debts exceeded 2 trillion yuan as of the end of June, raising its debt ratio to 58.53 percent, slightly up from the end of the first quarter of this year.

In 2010, the railway ministry reported an after-tax profit of 15 million yuan, slumping 99.45 percent from a year earlier.

A deadly train crash in east China last month aroused concerns that banks will tighten lending for railway construction amid higher risk. The train crash killed 40 people and injured another 191.

However, China's four largest state-owned banks have said they will continue to offer loans to the ministry based on market conditions and risk appraisal.

The ministry's spokesperson Wang Yongping said in May that the ministry's total investment this year will reach 745.5 billion yuan, with 600 billion yuan going to infrastructure construction.

China plans to invest 2.8 trillion yuan in the railway sector in the 2011-2015 period during which the length of its high-speed railways are expected to expand to 45,000 km.

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