Battle for Titan assets takes new turn
Sale of fuel storage unit to white knight hit by foot-dragging by Sino-US venture, source says
A drawn-out ownership fight over the crown jewel fuel storage assets of debt-troubled fuel trading and logistics firm Titan Petrochemicals has taken a new twist.
A person close to Titan and its white knight - partially state-owned fuel and metals trader Guangdong Zhenrong Energy - claimed a joint venture between United States-based private equity firm Warburg Pincus and SouthernPec, a Guangzhou-based rival of Titan, has failed to complete a deal to sell the storage assets to Guangdong Zhenrong.
"They have been using various excuses not to complete the sale," the person said. "They did not say they won't complete the deal, they are just dragging their feet."
The assets, consisting of four onshore fuel storage facilities in the strategic ports of Guangzhou, Quanzhou in Fujian province, Shanghai, and Yantai in Shandong province, were the most profitable and valuable operation of Titan. It also engages in vessel fuel supply, offshore fuel storage, oil transport and shipbuilding and repair.
The storage operation was set up in 2007 and was owned by StorageCo, a joint venture between Titan and Warburg. Warburg was also an investor in Titan's preference shares. After Titan sank into financial trouble owing to overly aggressive expansion amid the 2008-09 global financial crisis, it was forced to restructure its US$315 million debt raised in 2005.
Much of Titan's aggressive expansion and debt-piling was presided over by former chief executive Barry Cheung Chun-yuen. He is chairman of the embattled gold and silver futures exchange Hong Kong Mercantile Exchange, which originally planned to launch fuel oil futures - a product traded, transported and stored by Titan. He was head of Titan between July 2004 and January 2008.
Sustained difficulties in the oil shipping business saw Titan default in March last year on its repayment obligations on its restructured debt, and Warburg petitioned at a British Virgin Islands court to wind up StorageCo and at a Bermuda court to liquidate Titan.