Banking & Finance

Creditors line up to wind down Chinese oligarch’s offshore unit to pry loose assets for repaying debt

PUBLISHED : Wednesday, 25 July, 2018, 6:03pm
UPDATED : Thursday, 26 July, 2018, 11:14am

A group of creditors have applied in Hong Kong to wind down the primary offshore unit of China’s largest private oil conglomerate, owned by fallen oligarch Ye Jianming, as they seek to pry loose the group’s assets to recover their debt.

Harbour Vanguard, a closely held company, filed a petition at the Hong Kong High Court to liquidate Shanghai Huaxin Group (Hong Kong) Lmited, the offshore arm of Ye’s CEFC China Energy Group. The petition, supported by institutional creditors including China Huarong Asset Management, was opposed by Huaxin. The court has set Monday July 30 as the next hearing date.

The liquidation application is the most aggressive step taken by creditors owed a total of 98.3 billion yuan (US$14.5 billion) by CEFC since Ye disappeared from public view in mid-February for what’s believed to be regulatory investigations into his borrowings.

Ye, who turned 41 last month, has not been charged with any crime, and cannot be reached. The daily operations of his sprawling conglomerate - which owned oil and gas assets in China, Africa and eastern Europe - has been taken over since March by China Development Bank (CDB), the country’s largest policy lender and a creditor to as much as 85 per cent of CEFC’s loans.

The law firm Au-Yeung, Cheng, Ho & Tin, representing Huaxin, declined to comment.

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Huaxin handles offshore financing and the worldwide collection of information for Ye’s conglomerate, according to a 2017 job advertisement it published in Hong Kong. The company had HK$34 billion (US$4.3 billion) in total assets and HK$30 billion in total liabilities as of June 2017, according to a bond prospectus last year.

The company is listed as owner of four pieces of real estate valued together at 101.45 million yuan, in a March 1 assets inventory obtained by the South China Morning Post. They comprise two units at the Bel-Air luxury apartments in Hong Kong’s Cyberport, a villa in Prague and an apartment unit at the Trump World Plaza tower on the 1st Avenue of upper Manhattan.

Huarong, the biggest among China’s managers of soured assets, has been after Huaxin’s assets for a while.

Huaxin failed to pay HK$54 million in preferential dividends in a bond default in June, according to a filing last month made by Huarong to the Hong Kong stock exchange. The latter then issued a put notice on June 21 asking Huaxin to buy back HK$976.5 million in preferred shares.

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Ye’s downfall and the break-up of CEFC marks one of the fastest emergence and equally speedy demise of private entrepreneurship in modern China. CEFC came to prominence from out of nowhere to become one of China’s biggest overseas asset acquirers, buying real estate, oil and gas assets, and even football clubs and broadcast networks in the Czech Republic. It raked up 98.3 billion yuan of debt, including 30.8 billion yuan of bonds.

Its list of real estate assets, valued at a combined 21.64 billion yuan, include the Manhattan apartment, a mountainside villa in Lisbon, Wan Chai offices, Cyberport flats and CEFC’s corporate headquarters in the former French Concession in Shanghai, according to its March 1 assets inventory.

Still, selling assets to raise funds may be a challenge, as most CEFC’s property portfolio has been pledged as collateral for up to 12.4 billion yuan of loans, according to the company’s inventory.

(Corrects spelling of petitioner’s corporate name in story first published on July 25.)