China Rongsheng Heavy Industries will issue HKD1bn ($128.9m) of convertible bonds in an effort to raise funds for its working capital.

The bonds carry an interest rate of 7% per year and will be due in 2016, Rongsheng announced in a statement to the Hong Kong Stock Exchange.

After deducting of commissions and expenses, the Chinese shipbuilder is expected to receive net proceeds of HKD992.5m.

The privately-owned company intends to use approximately HKD385.2m for general working capital and about HKD607.3m for repayment of medium term bank borrowings of the group.

“The board considers the issue of the convertible bonds represents an opportunity to improve the liquidity position of the group, to reduce the financing costs of the group and to raise further capital for the company,” Rongsheng said.

Financially-weakened Rongsheng had earlier warned investors of a “substantial net loss” for its financial year ended 31 December 2013 due largely to lower revenue amid the current tough shipbuilding market.