China’s lithium giant Tianqi is facing a serious debt crisis. The company was stuck in repayment of a $ 1,884 million syndicated loan, which expired on November 29, and was in talks with the banking group. On November 30, the day after the deadline, Tensai Fengsha announced that it had agreed to extend the deadline by one month. The company and the banking group will continue to negotiate debt reschedules.
Lithium is an indispensable raw material for the manufacture of rechargeable batteries such as electric vehicles (EVs), and Tensai Feng Industry handles everything from mining to processing. In addition to having mining and processing plants in China, it holds mining interests in Australia and Chile in South America.
The debt crisis was triggered by the company’s large-scale overseas acquisition in December 2018. Acquired 23.77% of the issued shares of Chile’s leading lithium producer SQM at a huge cost of $ 4,066 million (about 423.4 billion yen). Combined with previous acquisitions, it became the second largest shareholder with a 25.86% stake in SQM.
To realize this acquisition, Tensai Bank borrowed $ 3.5 billion (about 364.4 billion yen) from banks in China and abroad, led by China CITIC Bank. Under the contract at that time, $ 2.3 billion (about 239.5 billion yen) was to be repaid in installments within two years, and the remaining $ 1.2 billion (about 124.9 billion yen) was to be repaid in installments within five years.
The deficit fell and interest payments did not remain
However, after the acquisition of SQM shares was completed, the international lithium market entered a downward phase due to oversupply. Under such circumstances, Tensai Hyogyo was forced to make provisions to prepare for the risk of impairment of acquired overseas assets in addition to the heavy interest burden, and the net loss in 2019 was 5.98 billion yuan (about 94.6 billion yen). Fall to. Recently, I have been in a difficult situation where I cannot afford to pay interest.
The quality of overseas mines in which Tensai Lithium has interests is excellent in the world, and if it is released at the disposal price for debt repayment, it can result in immeasurable loss in the long run. This is because the EV shift is accelerating in the automobile industry, and increasing demand for rechargeable batteries is a definite trend in the future. This has been the focus of negotiations between Tensai Lithium and the banking corps over the terms of debt reschedule.
This article is provided by “Caixin”
However, according to people familiar with the matter, it is very difficult for the Tensai Lithium industry to escape the debt crisis. In addition to the debt currently under negotiation, the $ 1.2 billion borrowed on the condition that it will be paid off within five years at the time of the acquisition of SQM will be due in installments from 2021. As a result, the company will inevitably continue to be under strong debt repayment pressure until 2022.