Guolian Aquatic, a leading producer and marketer of crustaceans in China, has gotten a low-interest CNY 348 million (USD 48.7 million, EUR 45.2 million) bailout from a consortium of Chinese banks to help it through the COVID-19 pandemic.
The Zhanjiang branches of three state-owned lenders – Guangdong Bank, the Construction Bank of China, the Post Office Savings Bank, and the Agricultural Bank of China – have all contributed to the loan package. The move is a further sign of government-orchestrated support for the seafood sector.
The loan term is one year and the interest rate is discounted by half, according to Guolian, which secured the package with assistance from the provincial offices of China’s Finance Ministry.
Leverage remains high across China’s corporate sector with a debt overhang from stimulus programs that pulled the country through the global financial crisis. Recently, China’s central bank has cut the rates it charges commercial banks to borrow cash in order to encourage them to lend to corporations now under pressure from disruption caused by the coronavirus.
Debt levels are high at Guolian. The cost of servicing debt at the firm rose by 33 percent to CNY 31 million (USD 4.5 million, EUR 4.1 million) in 2019 as the firm sought to adjust from dependence on U.S exports to the domestic market. Guolian’s R&D spend rose 43 percent year-on-year in 2019 to CNY 53 million (USD 7.6 million, EUR 6.9 million) while the company has also added new capacity, including a new crayfish processing plant coming online in 2019.
China-based corporate finance experts consulted by SeafoodSource said the COVID-19 epidemic can present a long-term upside to Chinese seafood companies such as Guolian. While it is now less likely for them to be able to raise money through equity sales, since most of these companies have seen their stock prices slide during the overall market downturn, it could give them an opportunity to gobble up smaller rivals, according to a corporate consultant who’s advising foreign companies looking for targets in China.
“Stronger firms could use the opportunity of low share prices to acquire weaker rivals – if they can get the bank loans. And stronger companies will be able to get the loans,” the consultant said.
Guolian is currently China’s largest seafood firm listed on Chinese boards, both in terms of market capitalization and revenues.
