CHINA’S Yanzhou Coal Mining Co. has moved to shore up its struggling Australian arm, Yancoal Australia Ltd., through a US$2.3 billion deal to refinance its debt to help it weather a prolonged slump in coal prices.

    The move follows the failure of a plan by Yanzhou to privatize Yancoal earlier this year after resistance from the Australian company’s second-largest shareholder, Hong Kong-based trader Noble Group.

    Yancoal said yesterday it plans to raise up to US$2.3 billion through a sale of convertible notes to shareholders, with its parent Yanzhou kicking in its full 78 percent share, worth US$1.8 billion.

    Yanzhou will also provide A$1.4 billion (US$1.22 billion) to help fund Yancoal’s loss-making coal operations and pay distributions on the notes, cashing up the Australian business that has been hammered by a drop in coal prices to 5-1/2-year lows.

    “In a depressed commodities marketplace facing continued uncertainty for the near-term, Yancoal’s existing level of debt is a significant constraint on our future expansion and operational improvement strategies,” Yancoal chief executive Reinhold Schmidt said.

    Yancoal’s shares have plunged 71 percent this year, a much bigger fall than its closest rivals in Australia, Whitehaven Coal and New Hope Coal, as it has struggled to manage its debt.

    Most of the funds will be used to repay existing senior debt owed to Yanzhou, effectively refinancing short-term debt into long-term debt. The debt is the legacy of Yanzhou’s A$3.5 billion acquisition of Felix Resources in 2009 at the height of the coal boom. (SD-Agencies)