China Oil Trader Agrees To Buy Titan As Suit Looms

Chinese oil trader Guangdong Zhenrong Energy Co Ltd has agreed to take control of debt-laden shipping and oil storage firm Titan Petrochemicals Group Ltd, which is facing a liquidation suit from US private equity firm Warburg Pincus.

Zhenrong is controlled by Zhuhai Zhenrong Co, formerly affiliated with China's defence industry and now one of the country's five biggest traders of crude oil and oil products.

Under an agreement signed with Guangdong Zhenrong on Aug 1, loss-making Titan plans to issue 7 billion new shares for HK$175 million ($22.57 million) to the oil trader, Titan said in a filing with the Hong Kong bourse on Wednesday.

The new shares, to be issued at HK$0.025 each, would represent nearly 90 percent of Titan's enlarged share capital after the offer, it said.

But Zhenrong will seek to keep Titan listed by maintaining the company's public float at no less than 25 percent of its total share capital, Titan said, adding that the share issue would be subject to a number of conditions, including a dismissal of Warburg's liquidation suit.

Warburg Pincus - which has invested more than $215 million in Titan since 2007 - filed a petition in a Bermuda court last month seeking to wind up the company, which had assets of HK$6.4 billion at the end of last year while current liabilities reached HK$7.7 billion.

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 $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 $40 million.

An acquisition would allow Zhenrong to make use of Titan's oil storage facilities in Guangdong, Fujian, Shanghai and Shandong in eastern China, a Guangdong Zhenrong official has said.

Titan has suffered losses for five consecutive years after its debt-driven growth strategy came undone during a steep downturn in the shipping industry.

Shares in Titan, which has a market value of $248 million, were suspended on June 19. The stock last traded at HK$0.246, after plunging 50 percent over the previous 12 months.