Yet another China shipbuilding company is taking the opportunity to raise funds amid relatively good financial market conditions as major state-owned yard China Ocean Shipbuilding Industry Group (Cosig) announced it was issuing HKD1bn ($129m) in three-year convertible bonds with an interest rate of 7.5%.

Cosig said in a stock market announcement that approximately 80% of the net proceeds will be used to fund capital expenditure projects to increase the company's production capability by, among other things, acquiring or constructing new shipyards near the coast which allows the group to build ships with a displacement exceeding 20,000 tonnes and to upgrade the existing production facilities of the company. Management noted that the group has secured four orders for heavy lift vessels and six orders for multi-purposes vessels since early 2014 and has been negotiating various other contracts as well.  However its yard facilities have a current limitation of 20,000 dwt in capacity.

"In light of the group’s plan to enhance its shipbuilding capability to construct larger vessels which it currently is unable to build, the steady increase in new orders and in anticipation of the further increase in demand when the industry revives, the Board expects that the enhancement and increase of the Group’s production capability will enable the Group to capture business growth in the long run," the group said. It added that the company has not identified any acquisition targets as yet. The remaining 20% will be used for working capital purposes.

Cosig has previously raised about HKD20m in July last year and about HKD57m in March through new share issues.Major privately-owned yard China Rongsheng earlier this month also issued HKD1bn in two-year convertible bonds at an interest rate of 7%, its second issuance in as many months this year.