Chinese lithium producer plunges on cash crunch in reminder of missteps from debt-funded global expansion
- Tianqi Lithium, a Sichuan-based lithium producer says it may not be able to repay a US$1.88 billion loan this month
- Loan helped fund the company’s US$4.1 billion acquisition of Chilean producer SQM in May 2018, just before lithium prices crashed
Tianqi Lithium’s shares plunged in Shenzhen after the leading Chinese lithium producer warned it may not have enough cash to repay a US$1.88 billion loan this month in yet another misstep since it was downgraded to junk in June last year.
The stock fell as much as 10 per cent to 22.16 yuan on Monday, before closing 7.7 per cent lower at 22.69 yuan. It was the biggest one-day drop since an 8.2 per cent setback on July 21, bringing this year’s decline to 25 per cent. The company’s sole dollar bonds were indicated near a five-month low.
The Sichuan-based company said it may not be able to repay the loan to a consortium led by China Citic Bank. The size of the loans is equivalent to 179.4 per cent of the company’s most recent audited net assets, it said in an exchange filing on Saturday.
The company has asked lenders to adjust the term structure and its application was still being processed, it added.
The company’s troubles continue to offer a reminder to investors that Chinese companies are still paying the price from their unbridled mergers and acquisitions (M&As) over the past decade. That debt-fuelled expansion strategy has tripped up bigger names such as Anbang Insurance and the sprawling HNA Group.
