(Hong Kong) – Investors in Hong Kong have shown little interest in an IPO by an education company over what one analyst said are concerns about the legal status of private schools on the mainland and the company's debt problems.

Virscend Edu, a private school group in the southwestern city of Chengdu, went public on the Hong Kong stock exchange on January 15, but investors bought just 28 million of its shares, about one-third of the total on offer, before trading started.

The company said it had found other buyers for the unsold shares, including the mainland cornerstone investors China Orient Multi-Strategy Master Fund and CRRC (Hong Kong) Co. Ltd., a wholly owned subsidiary of train building China Railway Rolling Stock Corp.

CRRC (Hong Kong) and China Orient Multi-Strategy Master Fund, a subsidiary of state-owned China Orient Assets Management Corp. bought 32.3 million shares each.

Virscend Edu runs five kindergartens, three high schools and one college in Chengdu. It planned to issue 750 million shares at a price of between HK$ 2.19 and HK$ 2.92 apiece, according to its prospectus. In the end it sold 722 million shares at HK$ 2.4 each.

Investors in Hong Kong have been wary of initial public offerings by companies on the mainland since stock market turmoil last summer, several analysts say. One said that investors are particularly concerned about legal status of private schools on the mainland.

The analyst, who asked that his name not be used, said private schools have been operating in a gray area because for-profit schools are banned on the mainland. The law says privately funded schools can operate for "reasonable returns" as a non-profit group.

Legislators were considering lifting the ban, but a vote was delayed at the end of last year.

Since Maple Leaf Education, a chain of international schools, listed in Hong Kong in late 2014, few private school firms on the mainland have gone public. EIC Education, a chain offering courses for students preparing to study abroad, is also working on an IPO in Hong Kong, people close to the company say.

Investors in Hong Kong were also concerned about debts held by Virscend Edu, the analyst said. Its prospectus showed its debt-to-equity ratio, a measurement of debt-related risks at a company, stood at 206.3 percent at the end of June. Short-term debts of 348 million yuan will come due this year.

Virscend Edu's executive president, Xu Ming, said on January 15 that the company will use one-fifth of the HK$ 1.7 billion it raised from the IPO to repay short-term debts. It will spend nearly half of the proceeds on expansion, he said.

The company reported profits of 96 million yuan in 2012, 54 million yuan in 2013 and 114 million yuan in 2014.

Virscend Edu shares were down nearly 1 percent to HK$2.41 on January 18.

(Rewritten by Li Rongde)