High-speed bullet trains at Beijing South Railway Station

China bullet train operator's $5bn IPO delayed after crash

A $5bn listing plan by the operator of China's new Beijing-Shanghai bullet train will be delayed after last month's train crash.



The delay follows China CNR's announcement last week that it would recall 54 bullet trains used on the showcase Beijing-Shanghai line, with services cut by 25 per cent.

State-controlled Beijing-Shanghai High-Speed Railway had hoped for an initial public offering (IPO) in Hong Kong and Shanghai as early as in 2012, but any listing is now unlikely in the immediate future, Thomson Reuters publication IFR said, citing bankers.

The rail crash in July, in which 40 people were killed, had further complicated the prospects of receiving regulatory approvals as well as a planned restructuring ahead of the IPO, a source told Reuters.

"China is not in a hurry to float something, especially after this tragedy," said the source.

"You have to take time to make sure all the things are aligned before going ahead with a project like this."

The crash accident between two bullet trains in Wenzhou triggered public fury, unusually bold media coverage and a freeze on approvals for new railway projects.

Until recently, China's high-speed rail presented by senior government officials as a nation's technological success. Now it has become a political albatross, drawing scorn from many citizens long frustrated with the hulking railways ministry.

China has been working for years to develop a high-speed rail network to rival Japan's famed bullet trains, and last year investment on the sector hit a record high of 749.5 billion yuan ($117.3 billion).

Japanese bullet trains have not had any accidents involving injuries or deaths since they started running in 1964.

China's railways sector was already under a cloud even before the crash, with railways minister, Liu Zhijun, a key figure behind the boom in the sector, dismissed in February over corruption charges that have not yet been tried in court.

Premier Wen Jiabao said earlier this month China would suspend new railway project approvals and launch safety checks on existing equipment.

The accident has caused a ripple effect on the broader industry.

China Railway Group, the country's largest railroad builder, said earlier this month it had dropped a plan to raise about 6.2 billion yuan via a share placement due to uncertainty over regulatory approval.

China South Locomotive and Rolling Stock (CSR) was forced to delay a shareholder vote on its $1.7bn fundraising plan, partly due to the Wenzhou crash.

"The development of the railway industry may slow in the immediate term due to safety concerns after the crash," said Zhao Xiaochuang, analyst at Century Securities in Shenzhen.

"Over the longer term, we are still positive about the industry because it's clear that the demand is there and the railway system is essential to the country's long-term infrastructure development," he said.

BOC International, CICC, JP Morgan and Macquarie had been picked to arrange the Hong Kong listing of Beijing-Shanghai High-Speed Railway, while CICC has been chosen to lead the mainland portion of the IPO, according to IFR.

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