G Steel expects return to profits G Steel Plc, the debt-ridden hot-rolled steel manufacturer, hopes to return to the black in the fourth quarter on higher capacity use and foreign-exchange gains, especially once its US$170-million debt restructuring plan wins approval from bondholders.
The listed company's revised bond exchange programme failed to be endorsed at yesterday's bondholders' meeting, as attendance was insufficient for a quorum.
Attendees had to represent at least 90% of the total outstanding principal to approve the plan, but failing that, only 50% will be required for the next meeting expected on Nov 22 or later.
A G Steel executive said capacity use at the company's plant has increased to 60% in this fourth quarter, up from 40% in the third, as customers are placing more orders.
The factory produces 60,000 tonnes of steel per month, less than the profitable minimum of 100,000 tonnes, due to working capital constraints.
But G Steel has recorded foreign exchange gains, as up to 70% of the raw materials, mainly steel scraps, are imported and have thus become cheaper thanks to the stronger baht.
"We're hoping the company can register a profit from operations and possibly a net profit with some forex gains," said one executive.
"If the debt restructuring plan wins approval from the bondholders, the net profit will be significantly higher."
The plan is projected to result in a profit of two billion baht, as interest and debt principals will be reduced. Total debt amount would decline by 5 billion baht, said the executive.
G Steel earlier proposed amending the bond exchange programme to where only 40% of the outstanding principal would be converted into the company's equity, down from 60% previously, with the balance rescheduled for repayment.
Bondholders also proposed waiving all accrued and unpaid interest from three times the payment defaults totalling $26.8 million. The plan calls for the release of negative pledges currently inhibiting the company's ability to use its fixed assets as collateral for new credit facilities.
"We're optimistic that the bondholders will vote to support the plan in order to allow G Steel to resume normal operations so they can gain when our share price rises. This is a win-win solution for both sides instead of getting nothing if our restructuring becomes bogged down," said the executive.
"Once the plan is endorsed, our new strategic partners will be willing to inject fresh capital into the company. We're now in close talks with two potential foreign investors."
Apart from $170 million worth of overdue bonds, G Steel also owes more than $200 million to trade creditors, with talks underway to restructure that debt.
