CSC obtains loans from Taiwan Cooperative Bank

Taipei, Sept. 18, 2003 (CENS)—To finance its investment in the East Asia Union Steel Co., China Steel Corp. (CSC) has decided to acquire loans from domestic and foreign banking institutions. CSC said the lending project will help it avoid potential foreign exchange risks rising from transnational investments.

East Asia Union is a joint venture between CSC and Japan's Sumitomo Metal Industries Ltd. CSC holds a 33% stake in East Asia Union, capitalized at 30.3 billion Japanese yen, and Sumitomo has the remaining 67%. CSC has to invest 10 billion Japanese yen in East Asia Union.

To that end, CSC recently offered an open bid for the first batch of the loans, at 4.4 billion Japanese yen. At last, Taiwan Cooperative Bank won the bid by beating out other eight contenders. The bank will offer the loans to CSC sometime in November at the annual interest rate of 0.22%.

Taiwan Cooperative Bank said the interest rate for the 4.4 billion Japanese yen loan is set at the average level of the Japanese financial market, which has seen lending rate close to zero. The loan will mature in seven years, but CSC can repay the loan four years after it obtains the loan.

CSC said it would hold another open bid between April and May 2004 for the remaining loans of 5.6 billion Japanese yen for the entire investment project.

With healthy financial status, CSC has abundant cash in hand for sound operations unless it launches large-sized investment projects. The company borrowed 2.6 billion Japanese yen to invest in Maruichi Steel Tube Ltd. At the end of 2000, and issued NT$5 billion corporate bonds in 2001.

By investing in East Asia Union, CSC will be able to get 1.8 million metric tons of steel billets per year from Mitsui's affiliated firm which owns blast furnaces. CSC said it would use the imported steel billets to meet the production need of its affiliate—Yieh Loong Corp.

Yieh Loong, which specializes in the production of hot-rolled and cold-rolled steel pipes, uses two million to 2.4 million metric tons of steel billets per year. About 600,000 metric tons of the steel billets are supplied by CSC and the remainder is imported from Japan, mainland China, Russia and other countries.

CSC said the formation of the East Asia Union Steel would help stabilize the supply of steel billets and improve Yieh Loong's operations.