Hongqiao raising $490m via rights

China Hongqiao Group Ltd, the world's biggest maker of aluminum, will raise nearly half a billion dollars from a rights offer underwritten by its founder, highlighting the difficulties of producers amid five-year-low commodities prices. The company's shares fell in Hong Kong.

The Shandong province-based company aims to bring in HK$3.84 billion ($490 million) by offering seven shares for every 50 held by shareholders, the company said in a statement to the Hong Kong Stock Exchange on Friday. Chairman and founder Zhang Shiping, who has pledged to underwrite 99 percent of the issue, holds more than 78 percent of Hongqiao through a holding company, according to the statement.

"Strategically, the rights issue will address working capital needs and highlights the challenging environment of aluminum markets at current prices," analyst Daniel Kang at JPMorgan Chase & Co said in a note on Monday. "While the parent's role may provide some confidence to the market, it could reduce the company's free float further."