China Eximbank provides a loan to Maanshan Iron and Steel to facilitate its acquisition of VALDUNES

Project narrative

In 2014, the Export-Import Bank of China issued a loan to Maanshan Iron and Steel Company Limited — a Chinese state-owned steel manufacturing company — to facilitate its acquisition of VALDUNES S.A.S. — a France-based railcar wheel manufacturer and designer — for a consideration of €13,000,000 EUR (RMB 108,734,997). VALDUNES S.A.S. is a France-based designer and manufacturer of railcar wheels for high-speed rail, axles, and wheel sets, headquartered in Valenciennes, France with two production bases in Dunkirk and Valenciennes. VALDUNESS was one of the four major companies work on high-speed rail wheel and axle technologies, besides Japan's Nippon Steel & Sumitomo Metal Corp, Germany's Bochumer Verein Verkehrstechnik GmbH, and Italy's Lucchini RS S.p.A. VALDUNES's high-speed wheels for France's high-speed rail network created, at the time, the world's highest test speed of 574.8 kilometer per hour. VALDUNES's products make up 50% of France's high-speed rail wheel and axle market. As of the end of September 2013, VALDUNES' total assets had a book value of €41.98 million EUR. On October 11, 2013, VALDUNES entered into bankruptcy protection procedures and then switched to bankruptcy reorganization procedures on March 31, 2014 The acquisition was motivated in part to decrease China's reliance on the import of high-speed rail wheels and axles and to increase the pace and quality of the development of both China's high-speed rail network and the Chinese high-speed rail industry domestically and internationally. The Anhui Provincial People's Government issued a letter stating its approval and China's National Railway Administration created a timetable with Maashan Iron and Steel Company for VALDUNES' entry into the Chinese market. While VALDUNES had gone bankrupt, its core technology, research & development, brand resources, sales network, and professional staff were seen as attractive. Its acquisition was expected to help improve will improve Maanshan's competitiveness in the wheels rail market. Still, analysts were concerned about the length of time it would take for VALDUNES's products to enter the Chinese market when Maashan needed success immediately amidst losses amidst its own losses. On May 16, 2014, Maanshan Iron and Steel Company founded MG-VALDUNES S.A.S. (Chinese: 马钢瓦顿) — a France-incorporated wholly-owned subsidiary of it — with a registered capital of €200,000 EUR for the acquisition. The French Embassy in China sent a delegation to Maashan Iron and Steel to inspect them on May 17, 2014. On May 22, 2014, the Board of Directors of Maanshan Iron and Steel Company approved the acquisition of VALDUNES S.A.S.'s assets via MG-VALDUNES for a cash consideration of €13,000,000 EUR. On May 26, 2014, France's Ministry of Economics and Finance expressed support for the acquisition. On May 29, 2014, the commercial court of Valenciennes approved that MG-VALDUNES S.A.S.'s purchase of all the assets of VALDUNES S.A.S. from its bankruptcy administrator, and accepted all employees and related retirement benefit contribution plan. On July 1, 2014, Maanshan Iron and Steel Company entered into the Completing Agreement with VALDUNES. On July 11, 2014, the paid-in capital of MG-VALDUNES S.A.S. was increased to €40,200,000 EUR to the a €40,000,000 EUR capital injection by Maashan Iron and Steel Company. On December 19, 2014, the acquisition was completed. VALDUNES traditionally charted premium prices for its products. Maanshan sought to exploit MG-VALDUNES's expertise to make wheels for high-speed trains in Chinese factories by sending engineers to assist and to gain access to the highly regulated European rail sector. When Maanshan took over, it lowered prices to takeover the market. According to Jérôme Duchange, MG-VALDUNES's former top executive in France, Maanshan instructed MG-VALDUNES to not miss a single order regardless of price or cost of production, with the plan to raise prices after it held enough market share, despite heavy losses for MG-VALDUNES. It began to export cheap wheels to Australian for mining; between imports from MG-VALDUNES itself and Maanshan's plants in China, the surge of imports led Australia to impose antidumping tariffs against both companies. Meanwhile, in Europe, MG-VALDUNES allowed Maanshan to bypass procurement rules of large European wheel purchasers like German state rail company Deutsche Bahn. MG-VALDUNES often finished and packaged wheels made in China for European customers, leading to fears that production in France would cease. From 2014 to 2021, Chinese rail-wheel exports to the European almost quadrupled since the acquisition of VALDUNES. Despite the losses, Chinese state-owned banks, including the Bank of China and China Construction Bank, issued low-interest loans to MG-VALDUNES to stay afloat, leading to accusations of subsidies that would be illegal for European companies to receive from their own governments. Despite support to MG-VALDUNES, it remained in losses, and the cost of European manufacturing industry rose beginning in 2020, leading to MG-VALDUNES to fall into insolvency in late 2023. MG-VALDUNEs filed a declaration of cessation of payments with the Lille Métropole commercial court on November 14, 2023 for judicial reorganization proceedings.