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Thursday 6 November 2008
Citigroup, FerroChina Creditors, Said to Form Asset Sale Plan
Citigroup Inc. and Citadel Investment Group LLC are among foreign creditors forming a plan to seize and sell the assets of FerroChina Ltd., a Chinese steelmaker that owes about $1 billion, three people involved in the matter said.
Citigroup, FerroChina Creditors, Said to Form Asset Sale Plan
6 November 2008
By Patricia Kuo and Helen Yuan
(Bloomberg) – Citigroup Inc. and Citadel Investment Group LLC are among foreign creditors forming a plan to seize and sell the assets of FerroChina Ltd., a Chinese steelmaker that owes about $1 billion, three people involved in the matter said.
The creditors hired London-based law firm Clifford Chance LLP to help them recoup $130 million of bonds due 2011 and $160 million of loans, said the people, who declined to be identified because the information isn’t public. CLSA Capital Partners and Credit Suisse Group AG are also seeking recoveries, they said.
Singapore-listed FerroChina on Oct. 9 said it suspended production and is unable to repay 706 million yuan ($103 million) of loans because of the “current economic crisis.” A further 4.5 billion yuan of local debt is at risk if restructuring talks with lenders and potential investors fail, it said.
If a company goes bankrupt in China investors can expect to receive an average 36 cents on the dollar, compared with a 79 percent recovery rate in Hong Kong and 76 percent in the U.S., according to New York-based law firm Weil, Gotshal & Manges LLP, which is overseeing Lehman Brothers Holdings Inc.’s bankruptcy. Chinese domestic corporate bond sales more than doubled this year to 176 billion yuan, data compiled by Bloomberg show, as companies expanded in the world’s fastest-growing major economy.
China’s bankruptcy law of June 2007 provides equal treatment for state- and privately-owned companies including foreign investors. A creditor can apply to a Chinese court to recognize or enforce a foreign court’s judgment involving a debtor’s assets in China.
169 Lawsuits
Changshu City, Jiangsu province-based FerroChina on Oct. 29 said six of its units face 169 lawsuits lodged in China by creditors and suppliers, without naming the claimants. The creditors appointed PricewaterhouseCoopers LLP as receiver for shares in two of FerroChina’s units, Chief Executive Officer She Chun Tai said in the Singapore stock exchange filing.
Japan’s Aozora Bank Ltd. and hedge funds Income Partners and PMA Investment Advisers Ltd. are also among foreign creditors to FerroChina, said the people involved in the talks. Local creditors include China Construction Bank Corp. and Industrial & Commercial Bank of China, Caijing magazine reported Oct. 23. Bangkok Bank Pcl, Thailand’s biggest lender, on Oct. 17 said it lent 120 million yuan to two FerroChina units.
Lenders that provided $85 million of five-year loans have legal claim to FerroChina’s plants and property, said the people. The loans, signed in 2007, pay as much as 5 percentage points more than the London interbank offered rate, they said.
The $130 million notes were sold in March and May this year, paying a 13.5 percent coupon, Bloomberg data show.
Rescue Hopes
Sally Greig, a Hong Kong-based spokeswoman for Clifford Chance, confirmed FerroChina’s overseas creditors hired the firm and declined to disclose further details. Lyanna Chan, PricewaterhouseCoopers’ spokeswoman in Hong Kong, declined to comment citing client confidentiality.
FerroChina Chief Financial Officer Soh Wai Kong couldn’t be reached at his office for comment today and hasn’t responded to an e-mailed query. Hong Kong-based Citigroup spokesman James Griffiths hasn’t returned calls. Credit Suisse spokesman Adam Harper declined to comment, as did Aozora’s Masaaki Harada.
Creditors and shareholders hope an investor will buy FerroChina so they don’t have to seize assets or write down their investments amid plunging bond and stock markets, said the people.
The company is seeking a bailout with help from the Changshu City government, a city official said, declining to be identified before a public announcement. Officials of the Dongbang Industrial Park and city government have formed a special team to handle the rescue, the official said.
Steelmakers Struggle
“It would be reasonable for the government to find a nearby steelmaker to take over FerroChina,” said Zhang Qin, a Hong Kong-based analyst with JPMorgan Chase & Co. “FerroChina may eventually find a buyer, but it could take a long time, even a few years. Bigger steelmakers are struggling themselves amid a tumbling market.”
China’s steel prices have fallen 42 percent to 3,436 yuan a metric ton from a record 5,597 yuan on June 5 as the global economic slowdown curbs demand from builders and carmakers. All Chinese steelmakers were unprofitable in October, and may take two months to return to profit, the China Iron & Steel Association said on Oct. 23.
The 1998 failure of Guangdong International Trust & Investment Corp., the country’s largest corporate bankruptcy, left investors mired in writedowns and legal wrangles. Gitic owed more than 20 billion yuan to about 200 creditors including Cede & Co., holding company of the U.S. Federal Reserve’s Depository Trust Co., Government of Singapore Investment Corp. and UBS AG.
The company in 2000 made its first payout, offering 711 million yuan, or about 3 percent of what it owes, to 215 creditors including Bank of China and Standard Chartered Plc.
FerroChina last traded on Oct. 7 at 54.5 Singapore cents, valuing the company at S$436 million ($293 million). The shares, which are suspended, have fallen 78 percent in the past year.
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Citigroup, FerroChina Creditors, Said to Form Asset Sale Plan
6 November 2008
By Patricia Kuo and Helen Yuan
(Bloomberg) – Citigroup Inc. and Citadel Investment Group LLC are among foreign creditors forming a plan to seize and sell the assets of FerroChina Ltd., a Chinese steelmaker that owes about $1 billion, three people involved in the matter said.
The creditors hired London-based law firm Clifford Chance LLP to help them recoup $130 million of bonds due 2011 and $160 million of loans, said the people, who declined to be identified because the information isn’t public. CLSA Capital Partners and Credit Suisse Group AG are also seeking recoveries, they said.
Singapore-listed FerroChina on Oct. 9 said it suspended production and is unable to repay 706 million yuan ($103 million) of loans because of the “current economic crisis.” A further 4.5 billion yuan of local debt is at risk if restructuring talks with lenders and potential investors fail, it said.
If a company goes bankrupt in China investors can expect to receive an average 36 cents on the dollar, compared with a 79 percent recovery rate in Hong Kong and 76 percent in the U.S., according to New York-based law firm Weil, Gotshal & Manges LLP, which is overseeing Lehman Brothers Holdings Inc.’s bankruptcy. Chinese domestic corporate bond sales more than doubled this year to 176 billion yuan, data compiled by Bloomberg show, as companies expanded in the world’s fastest-growing major economy.
China’s bankruptcy law of June 2007 provides equal treatment for state- and privately-owned companies including foreign investors. A creditor can apply to a Chinese court to recognize or enforce a foreign court’s judgment involving a debtor’s assets in China.
169 Lawsuits
Changshu City, Jiangsu province-based FerroChina on Oct. 29 said six of its units face 169 lawsuits lodged in China by creditors and suppliers, without naming the claimants. The creditors appointed PricewaterhouseCoopers LLP as receiver for shares in two of FerroChina’s units, Chief Executive Officer She Chun Tai said in the Singapore stock exchange filing.
Japan’s Aozora Bank Ltd. and hedge funds Income Partners and PMA Investment Advisers Ltd. are also among foreign creditors to FerroChina, said the people involved in the talks. Local creditors include China Construction Bank Corp. and Industrial & Commercial Bank of China, Caijing magazine reported Oct. 23. Bangkok Bank Pcl, Thailand’s biggest lender, on Oct. 17 said it lent 120 million yuan to two FerroChina units.
Lenders that provided $85 million of five-year loans have legal claim to FerroChina’s plants and property, said the people. The loans, signed in 2007, pay as much as 5 percentage points more than the London interbank offered rate, they said.
The $130 million notes were sold in March and May this year, paying a 13.5 percent coupon, Bloomberg data show.
Rescue Hopes
Sally Greig, a Hong Kong-based spokeswoman for Clifford Chance, confirmed FerroChina’s overseas creditors hired the firm and declined to disclose further details. Lyanna Chan, PricewaterhouseCoopers’ spokeswoman in Hong Kong, declined to comment citing client confidentiality.
FerroChina Chief Financial Officer Soh Wai Kong couldn’t be reached at his office for comment today and hasn’t responded to an e-mailed query. Hong Kong-based Citigroup spokesman James Griffiths hasn’t returned calls. Credit Suisse spokesman Adam Harper declined to comment, as did Aozora’s Masaaki Harada.
Creditors and shareholders hope an investor will buy FerroChina so they don’t have to seize assets or write down their investments amid plunging bond and stock markets, said the people.
The company is seeking a bailout with help from the Changshu City government, a city official said, declining to be identified before a public announcement. Officials of the Dongbang Industrial Park and city government have formed a special team to handle the rescue, the official said.
Steelmakers Struggle
“It would be reasonable for the government to find a nearby steelmaker to take over FerroChina,” said Zhang Qin, a Hong Kong-based analyst with JPMorgan Chase & Co. “FerroChina may eventually find a buyer, but it could take a long time, even a few years. Bigger steelmakers are struggling themselves amid a tumbling market.”
China’s steel prices have fallen 42 percent to 3,436 yuan a metric ton from a record 5,597 yuan on June 5 as the global economic slowdown curbs demand from builders and carmakers. All Chinese steelmakers were unprofitable in October, and may take two months to return to profit, the China Iron & Steel Association said on Oct. 23.
The 1998 failure of Guangdong International Trust & Investment Corp., the country’s largest corporate bankruptcy, left investors mired in writedowns and legal wrangles. Gitic owed more than 20 billion yuan to about 200 creditors including Cede & Co., holding company of the U.S. Federal Reserve’s Depository Trust Co., Government of Singapore Investment Corp. and UBS AG.
The company in 2000 made its first payout, offering 711 million yuan, or about 3 percent of what it owes, to 215 creditors including Bank of China and Standard Chartered Plc.
FerroChina last traded on Oct. 7 at 54.5 Singapore cents, valuing the company at S$436 million ($293 million). The shares, which are suspended, have fallen 78 percent in the past year.
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