Titan Petrochemicals prepares to put debt plan to bondholders
Titan Petrochemicals, which owes US$400 million and is controlled by white knight petroleum products trader Guangdong Zhenrong Energy, will seek court permission early next month to convene a bondholders meeting to vote on a debt restructuring proposal.
A "yes" vote is a mutual pre-condition to an agreement with Singapore's Keppel, the world's largest oil drilling rig maker by market share, to fund Titan's foray into oil rig production at its mothballed shipyard in Fujian province. There are also pre-conditions for Titan's application made in May to Hong Kong's bourse for its shares to resume trading after they were suspended for more than two years, executive director Patrick Wong Siu-hung said.
For the proposal to be approved, at least half the creditors must be present at the meeting, and creditors with claims totalling at least 75 per cent of Titan's debt must agree to it. They were offered cash and shares options carrying "haircuts" of 60 to 90 per cent of their claims.
Fuel trader Titan was founded in 2002 by Fujian businessman Tsoi Tin-chun. It bought tankers, built fuel storage tank farms and diversified into shipbuilding and repairing. The company sold US$400 million in high-yield bonds in 2005. The global financial crisis saw it default on its debt and creditors applied to the court for it to be liquidated. It closed down the trading operation and lost its storage farms and shipyard to creditors.
Guangdong Zhenrong bought a majority Titan stake from Tsoi, paid off the shipyard's debt and bought the storage assets from the liquidators. Keppel last April clinched a preliminary deal to help Titan transform the shipyard into a rig maker, in exchange for an annual management fee of US$2 million, and a share of its operating profit.
Wong said the shipyard has the space for four rigs to be made at the same time, although it takes more than a year for each to be built. Rigs cost US$200 million to US$800 million. Some 100 million yuan (HK$125 million) to 200 million yuan worth of equipment is required at the shipyard, which will be funded by a convertible bond issue.
Titan chief executive Tang Chaozhang said Titan shipyard would allow it to better penetrate the mainland, which tends to favour domestic makers. Keppel will be granted convertible bonds or warrants convertible into shares within five years, which could see it to own up to 9.9 per cent of Titan.