Guangdong Zhenrong Energy Co. buys Titan Petrochemical Group

The debt-laden shipping and oil storage company Titan Petrochemical Group Ltd. is being sold to Chinese oil trader Guangdong Zhenrong Energy Co Ltd. Titan currently faces a liquidation suit from the U.S. private equity firm Warburg Pincus. China’s Guangdong Zhenrong is controlled by Zhuhai Zhenrong Co., one of the country’s five biggest traders of crude oil and oil products and was formerly affiliated with China’s Defense Ministry.
Under an agreement signed with Guangdong Zhenrong on August 1, Titan will issue 7 billion new shares for HK$175 million (US$22.5 million) to the oil trader. Titan said the new shares, which will be issued at HK$0.025 each, represent nearly 90% of Titan’s share capital after the offer. However, Zhenrong will try to keep Titan listed by maintaining the company’s public float at no less than 25% of its total share capital.
According to Titan, this agreement on the share issue would be subject to a number of conditions, including the dismissal of Warburg’s liquidation suit. Warburg Pincus had invested more than US$215 million in Titan since 2007. In July, It filed a petition in a Bermuda court seeking to liquidate the company, which had assets of HK$6.4 billion (US$825.3 million) at the end of last year, while current liabilities reached HK$7.7 billion (US$993.0 million). Titan posted losses for five consecutive years, due to what it says is a steep downturn in the shipping industry, causing its growth strategy to fail.
Trading of Titan shares were suspended on June 19. The stock last traded at HK$0.246 (US$0.03), after plunging 50% over the previous 12 months. Warburg has also sued Titan and some of its executives in Hong Kong’s High Court for misrepresentation and breach of contract. Zhenrong has also agreed to pay up to US$145 million to buy Warburg Pincus’ interest in Titan’s storage companies on the mainland and to provide the storage companies with interim financing of up to US$40 million. This would allow Zhenrong to make use of Titan’s oil storage facilities in Guangdong, Fujian, Shanghai and Shandong in eastern China. (August 9, 2012)