Sinopec plans $2.8 bln bonds for expansion

HONG KONG, Dec 7 (Reuters) China's Sinopec Corp. , Asia's largest refiner, said on Thursday it planned to raise US$2.8 billion through convertible and domestic bonds to fund its group restructuring and for downstream expansion.

The company, which has a market value of close to US$85 billion, is also seeking shareholders' approval for the right to issue new shares of up to 20 percent of its existing share capital, in what some analysts see as a move to further build its warchest for more buyouts within the group.

Sinopec has been engineering an internal overhaul to simplify a sprawling structure spanning several listed arms, and has taken private two Hong Kong-listed units, Beijing Yanhua Petrochemical Co. Ltd. and Sinopec Zhenhai Refining & Chemical Co. Ltd.

The company said on Thursday that it planned US$1.5 billion of bonds convertible into its Hong Kong-listed H-shares to repay existing foreign currency loans related to the privatisation of the two subsidiaries.

''Sinopec's group restructuring is now at its climax.'' said Gideon Lo, an analyst at DBS Vickers. ''After that it may focus more on expansion next year.'' The company also said it would issue 10 billion yuan (US$1.3 billion) of domestic bonds to fund projects, including ethylene works in Tianjin, Zhenhai and Guangzhou.

Sinopec will hold a shareholder's meeting next month to seek approval for the bond issue and right to issue new shares.

The issue size, interest rate, conversion price, exchange rate structure and timing of the convertible bond issue had yet to be determined, and the bonds would be offered to professional and institutional investors, Sinopec said.

In a separate statement, Sinopec said it would buy 3.5 billion yuan (US$447.4 million) worth of oil production assets, mostly in Shengli Oilfields, from its controlling shareholder China Petrochemical Corp., to enhance its oil production in the fields.

The deal would be paid by internal resources.

Sinopec's shares fell 1 percent on Thursday to HK$6.41, in line with a 1 percent drop in the index of Chinese companies listed in Hong Kong <.hsce>. The company's shares have jumped more than 68 percent this year, compared wiht a 65 percent gain in H-shares.

On Wednesday, seven Chinese firms related to Sinopec and listed on mainland bourses suspended trading amid expectations that some would be sold out and privatised in the course of state-owned share reforms.

Shenzhen-listed Sinopec Wuhan Petroleum Co. Ltd.

, Shijiazhuang Petrochemical Co. and Taishan Petro are directly controlled by Sinopec.

The other four, Yuexingchang , Beijing Huaer , SC Meifeng and Shanghai-listed Lurun Co. are controlled by Sinopec's state-owned parent.

Sinopec, which vies with PetroChina and CNOOC Ltd. to supply the world's second-largest oil market, is tipped by analysts as the top winner among the country's oil stocks next year amid lower oil prices.

Its dual-listed Sinopec Shanghai Petrochemical Co. Ltd.

and Sinopec Yizheng Chemical Fibre Co.

Ltd. are likely to be the last to be restructured.

''The company is looking for an aggressive new share issue approval, which may indicate that it could buy out its units with its new shares,'' said one analyst, who declined to be identified.

REUTERS SBA DS1543