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  Bank of Communications Granted First M&A Loan

On March 3rd, Bank of Communications signed the M&A Loan Contract with Baosteel Group Co., Ltd., hence initiating its M&A loan service. According to the contract, Bank of Communications Shanghai City Branch is to grant a M&A loan worth RMB 750 million Yuan to Baosteel Group for the latter acquisition of 56.15% equity from Ningbo Steel Co., Ltd. With the successful conclusion of the M&A contract, the first M&A loan of its kind was granted by a Chinese bank to a steel producer. This is also the first M&A case in which a key state-owned enterprise received loans from Bank of Communications to support the optimization of the industrial layout after the promulgation of the national rejuvenation program of ten pillar industries.

Taking a leading role in the Chinese steel industry, Baosteel Group enjoys a good credit standing both at home and abroad. With this M&A, the group becomes a pioneer in the industrial restructuring in a timely fashion. Lately, the State Council publicized the Restructuring and Rejuvenation Program of the Steel Industry, which gave priority to optimization of industrial layout and elevation of industry concentration, in order to advance the M&A of large state-owned steel enterprises. What Bank of Communications did is just in line with the essence of the Program and is actively making efforts to promote the enterprise syndicate and foster large & mega-sized steel groups with international competitiveness.

Due to impact of changing national and international macro-economic situation, in 2008, the output of the Chinese steel industry was increasing at a lower rate, export decreased and the industrial profitability was in a dire situation. Under the circumstances, Bank of Communications, as the strategic partner of Baosteel Group Company, has always been actively supportive of the company. Closely following Baosteel’s development plan and key businesses, Bank of Communications brings into full play its overall advantages to meet Baosteel’s demand for financial products and give suggestions for business development.

In the second half of 2008, under the guidance of relevant national governments and local government, Baosteel Group Co., Ltd. held consultations with shareholders of Ningbo Steel Co., Ltd. on the acquisition of partial equity. Bank of Communications closely followed the financing demands of Baosteel for the M&A, and in accordance with the Guidelines on the Risk Management of M&A Loans of Commercial Banks published by China Banking Regulatory Commission and the corresponding Bank of Communications Provisional Management Methods of M&A Loans published by Bank of Communications, recommended the M&A loan, a new financing instrument, to Baosteel at the earliest possible date, to actively support Baosteel’s acquisition of Ningbo Steel Co., Ltd.