Guangdong Zhenrong Energy, a unit of state-owned commodities trader Zhuhai Zhenrong, has offered to pay HK$175 million to take over debt-troubled fuel trading and logistics firm Titan Petrochemicals Group.
The proposed price represents a discount of about 99 per cent to the price Hong Kong-based Titan Petrochemicals shares last traded before they were suspended.
But, Guangdong Zhenrong stipulated that its offer would be off the table if any liquidator was appointed to wind up Titan Petrochemicals.
The condition is upsetting for creditor US-based private equity firm Warburg Pincus, which is seeking a court order in Bermuda to wind up Titan Petrochemicals and to appoint a provisional liquidator so the company's assets can be independently verified and accounted for. A court hearing is scheduled on August 16.
'Why must Zhenrong's offer be mutually exclusive to the appointment of liquidators? Zhenrong can discuss with the liquidators about its offer while the liquidators carry on examining Titan's assets,' a person close to Titan Petrochemicals' creditors said.
A person familiar with Titan Petrochemicals said that if the company went into liquidation it would lose its listing status, which was not favourable to its business operation.
Warburg also obtained a court order in the British Virgin Islands last month to wind up Titan Group Investment, which is 50.1 per cent owned by Warburg's associate firm Saturn Storage and 49.9 per cent by Titan Petrochemicals.
Saturn filed a writ at the Hong Kong High Court alleging it had been damaged and faced potential liabilities because of 1.48 billion yuan (HK$1.81 billion) of unauthorised guarantees provided by three units of Titan Group Investment, which builds and operates fuel storage facilities in Guangdong, Fujian, Shanghai and Shandong. Saturn alleged that Titan Petrochemicals, its founder and ex-chairman Tsoi Tin-chun, its executive director, Patrick Wong Siu-hung, and its chief financial officer, Allen Tu Chung-to, caused the execution of the guarantees without the knowledge and consent of Warburg.
Titan Petrochemicals has yet to respond to the accusations.
Guangdong Zhenrong, which is 44.3 per cent owned by Zhuhai Zhenrong and the rest by nine mainland businesspeople, offered to buy 7 billion new Titan Petrochemicals shares at 2.5 HK cents each, Titan Petrochemicals said yesterday. That would give Guangdong Zhenrong 90 per cent of Titan Petrochemicals. The offer price is 98.98 per cent lower than the HK$2.46 last traded price of Titan Petrochemicals before trading in its shares was suspended on June 19.
Guangdong Zhenrong also has offered to buy all of Titan Group's interests in the storage facilities for up to US$145 million. Warburg, which owns 50.1 per cent of Titan Group, is seeking to retrieve from Titan Group US$235 million on the convertible preferred shares and convertible notes it bought with accrued interest.
Guangdong Zhenrong Energy's offer for Titan Petrochemicals is this much of a discount on the troubled firm's last-traded share price