ICBC to pump $3.2b into bailout of Zhu Kuan Group
The mainland's biggest lender, Industrial and Commercial Bank of China (ICBC), is funding a $3.2 billion bailout of the insolvent Zhu Kuan Group as part of a wider loan package to the Zhuhai government, according to sources.
Creditors of the Zhuhai government window company owed almost $8 billion will receive a letter today setting out the parameters of the settlement after a memorandum of understanding was signed by the parties on Friday last week, bringing seven years of debt talks to an end.
Land and assets seized by court-appointed liquidators in Hong Kong after Zhu Kuan was declared bankrupt in October last year will be returned to the Zhuhai government as part of the arrangement, according to the sources. There will also be a stay of the winding-up proceedings.
However, it is understood that the assets will be held by ICBC as security on the $3.2 billion loan being advanced to the government as part of a far-reaching financing agreement.
'The loan is for much, much more,'' said one source.
Officials at ICBC were unable to comment yesterday.
Zhu Kuan ran into financial difficulty in 1998, beginning a long series of talks that ultimately turned hostile in summer 2003 when creditors took legal steps to seize and protect assets amid a breakdown in trust with the Zhuhai government.
Winding-up petitions were filed in August 2003 against Zhu Kuan group companies by Standard Chartered Bank on behalf of at least 28 lenders that included BOC Hong Kong (Holdings), Bank of America and Societe Generale.
The Zhuhai government's trade vehicle was put into the hands of liquidators from RSM Nelson Wheeler Corporate Advisory Services - now known as Alvarez & Marsal - in October that year.
Earlier this year, the Zhuhai government returned to the negotiating table with an offer of $2.5 billion in cash, giving unsecured creditors a 21.33 per cent return, barely a percentage point higher than a previous offer of $2.25 billion that was rejected in August 2003.
This was an improvement on an earlier offer that would have left unsecured creditors with an 18 per cent recovery. Under the $3.2 billion agreement, unsecured creditors will receive 30 cents for every dollar of debt.
Among the property seized by liquidators was land in Lok Ma Chau, Sai Kung and Yuen Long with a book value of $180 million, and 22 properties in Zhuhai.
The Zhuhai government also had to contend with a legal wrangle with liquidators over the plot of land where the proposed Hong Kong-Zhuhai bridge was likely to enter the mainland city.
Liquidators had claimed the site was handed over to the government without creditors' knowledge and had taken legal steps to reclaim it.
Additional reporting by Bei Hu
