Warburg sues Titan for breach of contract
US private equity firm Warburg Pincus, a substantial investor in Titan Petrochemicals Group, is suing the debt-laden fuel-trading and logistics firm and its former chairman Tsoi Tin-chun for misrepresentation and breach of contract over 1.48 billion yuan (HK$1.82 billion) in alleged unauthorised debt guarantees.
Warburg's associate firm Saturn Storage claimed in a writ filed on Thursday with the Hong Kong High Court that it had been damaged and faced potential liabilities because of unauthorised guarantees that were provided by three subsidiaries of Titan Group Investment, which is 50.1 per cent owned by Saturn and 49.9 per cent by Titan Petrochemicals.
Titan Group Investment operates fuel storage facilities in Guangdong, Fujian, Shanghai and Shandong.
Saturn alleged that Tsoi, Titan Petrochemicals, its executive director Patrick Wong Siu-hung and chief financial officer Allen Tu Chung-to caused the execution of the guarantees. Warburg is seeking unspecified damages and costs.
'The lawsuit relates to various breaches of contract and misrepresentations, including in connection with the unauthorised execution and concealment by the defendants to the lawsuit of certain guarantees totalling approximately 1.48 billion yuan,' Warburg said in a statement.
According to a person familiar with the situation, the guarantees were made without the knowledge of Warburg, and were for the benefit of firms under Titan Petrochemicals.
'[Titan] is aware of the writ but the claims against it have not yet been particularised,' a Titan spokesman said. 'Once full particulars are provided, the company will seek advice and respond accordingly.'
Titan Petrochemicals piled up HK$3 billion of bank loans and bonds payable after years of aggressive expansion, by building fuel storage facilities costing US$1 billion, and buying Tsoi's fuel trading and shipyard operations. To raise funds to meet its debt obligations, it signed a deal late 2010 to sell the shipyard to Grand China Logistics, part of HNA Group that operates Hainan Airlines, but the latter did not complete the deal and is suing Titan Petrochemicals in Shanghai. Grand China is seeking to terminate the sale citing breach of contract.
Warburg, which has invested over US$200 million in the bonds and shares of Titan Petrochemicals and its fuel storage units, filed a petition in a British Virgin Island court earlier this month seeking to wind up Titan's fuel storage business, and the court appointed four co-liquidators on July 17, Reuters quoted KPMG as saying.
Warburg has invested more than this much, in US dollars, in the bonds and shares of Titan Petrochemicals and its fuel storage units