Date: 2013-07-31

YCEG Announced Their LYC Restructuring Plan

July 10, YCEG(Yongcheng Coal & Electricity Group) informed Luoyang State Assets Committee that they are willing to acquire Luoyang Bearing Group(LBG).

*LBG is just the previously mentioned LYC Group. To avoid misundertanding with LYC Bearing, we use LBG instead.*

In April 2004, YCEG and LBG formed a joint venture, Luoyang LYC Bearing Co.,Ltd. As the holder, YCEG invested RMB250 million, getting 62.5% of the company shares; with investment of about RMB150 million, LBG only took 37.5% shares.

Due to the special identity, YCEG's restructuring solution differentiated those of Schaeffler Group and Tianma Bearing. The detail are as following:

First, Hurrying LBG into completing the assets transfering that they had promised when forming LYC Bearing Co.,Ltd. The assets include the ownership of LBG's subsidiaries like Dongsheng Co.,Ltd, Railway Bearing Co.,Ltd etc.

As LBG's assets had been frozen, YCEG decided to let LYC Bearing repay RMB30 million to the bank or take a debt of RMB40 million, so as to free LBG's assets. LBG should compensate LYC Bearing by transfering equivalent worth assets later.

Then, LBG apply for bankruptcy to reduce their debt.

Finally, during LBG's bankruptcy, all their free assets, worth RMB337 million, should be managed by LYC Bearing. After verification, the assets will be acquired by YCEG by means of capital increase.

Following the above three steps, YCEG can complete their restructuring plan. Since then, LBG will no long exist, LYC will be the exclusive brand that belonged to LYC Bearing Co.,Ltd.


Comparation

-Price

Schaeffler Group: RMB1.1 billion
Tianma Bearing: RMB1.0 billion
YCEG: RMB0.737 billion

YCEG's restructuring cost include two parts: the money they had spent in forming the LYC Bearing Co.,Ltd; and those sum will, if possible, be spent to acquire LBG's free assets.

-Relationship with Authority in Charge of this Restructuring

YCEG: Good
Tianma Bearing: Average
Schaeffler Group: N/A

Authority in charge of LYC restructuring is Luoyang State Assets Committee. YCEG is a state-run enterprise. It's this nature help them win the qualification to form LYC Bearing Co.,Ltd with LBG last year. Tianma Bearing is a domestic private enterprise.

-Technological Advantage

Schaeffler Group: International giant in bearing industry
Tianma Bearing: Promising private enterprise
YCEG: Aboslute layman

Additionally, YCEG had mentioned in their restructuring plan that if they can win the bid, they will consider attracting domestic or foreign strategic partners. It means that YCEG's winning may lead to another acquisition of LYC.

Note:
In previous stories, we used "LYC Group" and "LYC Bearing" to differentiate the two company. It seems easy-confused, so we substitute LBG(Luoyang Bearing Group) for "LYC Group".

All terms like "LYC Acquisition","LYC Restructuring","LYC-Schaeffler Restructuring" appeared in previous stories, all refers to the acquisition of both LBG and Luoyang Bearing Co.,Ltd.

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