New bid for Titan storage assets
The saga of the restructuring of debt-ridden fuel trading and logistics company Titan Petrochemicals Group and its crown-jewel fuel storage unit has taken a new twist, with creditor US private equity firm Warburg Pincus forming a joint venture with Titan Petrochemicals' rival SouthernPec to bid for the storage unit.
The entry of Guangzhou-based SouthernPec is not welcome news to Titan Petrochemicals' would-be white knight Guangdong Zhenrong Energy, which has offered to buy all the operating assets of the storage unit, Titan Group Investment, for up to US$145 million.
SouthernPec is one of the mainland's largest fuel oil importers and has fuel storage and transport operations. It posts annual sales of 8 million tonnes and turnover of more than 40 billion yuan (HK$49.02 billion), according to its website.
Guangdong Zhenrong, which is 44.3 per cent owned by state-owned oil and commodities trader Zhuhai Zhenrong and the rest by nine mainland businesspeople, has also offered to buy new Titan Petrochemical shares that would give it a 90 per cent stake for HK$175 million. Its offer price is 99 per cent below Titan Petrochemical's last traded price before trading was suspended on June 19.
The Warburg-SouthernPec joint venture aimed to submit a restructuring plan for the Titan Group that would include providing extra working capital and professional management, both partners said yesterday. They did not give an offer price.
'By working alongside the liquidators, we are ready to deploy our available resources and extend our excellent relationships with banks to provide customers and lenders with comfort that the [Titan Group]'s business will continue to be stabilised,' it said.
Warburg got a court order on the British Virgin Islands last month to wind up the Titan Group.
The Titan Group owes Warburg about US$242 million in loan, convertible preference shares and convertible notes, and accrued interests. Titan Petrochemicals also owes Warburg US$49 million in convertible preference shares and interest.
A huge oil trading loss suffered in the financial crisis and subsequent downturn in the transport market saw Titan Petrochemicals report total net losses of HK$3.5 billion from 2008 to last year. The fuel storage operation, with facilities in Guangdong, Fujian, Shanghai and Shandong, was the only bright spot, with net profit of HK$50 million last year.
After talks with bond-holders and some repayments in 2010, Titan Petrochemicals has cut the amount it owes them by half to about US$166 million. Guangdong Zhenrong has yet to propose a repayment plan to the bond-holders.
The stake Warburg's associate firm Saturn Storage holds in the Titan Group, whose remaining 49.9 per cent is owned by Titan Petrochemicals