Finance risks weigh China heavy equipment makers

Special leasing deals raise flags as equipment firms face slowdown

BEIJING (Caixin Online) — Cash is tight, competition fierce and a business slump is biting construction companies that buy their powerful excavators, bulldozers and cranes.

Nevertheless, China’s heavy equipment manufacturers are plowing forward with plans for major fund-raisers, including stock listings, and offering customers low-cost leasing plans that some call dangerous.

The domestic sector’s leader, Sany Heavy Machinery (CN:600031), for example, has set an Aug. 31 deadline for an H-share initial public offering on the Hong Kong Stock Exchange that would raise about $2 billion. Likely underwriters include Bank of America Merrill Lynch, Citigroup, CITIC International, Industrial and Commercial Bank of China, and Morgan Stanley.

“We’ll choose a time for an issuance based on the price situation,” Sany CEO Xiang Wenbo said. “We hope to sell for HK$20 [$2.56].”

Raising cash by selling a sanitation equipment business is on the agenda for Zoomlion Heavy Industry Science & Technology Development Co. Ltd. (CN:000157). The plan calls for working with private equity firms to sell the unit and beef up Zoomlion’s concrete machinery business with plans for up to 140 billion yuan ($22 billion) worth of bank loans.

Xiamen Xiagong Machinery Co. Ltd., meanwhile, on June 14 announced a project to raise up to 1.5 billion yuan from corporate bond investors.

Heavy equipment companies are counting on investors to look past the current business environment and embrace their positive forecasts for growth. But it may be a tough sell.

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