Titan Receives $200 Million Proposal for 51% of the Business

GDZR is making over HK$1.6 billion available for the deal.

Titan Petrochemicals Group Ltd. (Titan) [HKG:1192] has received a non-legally binding proposal of some USD $200 million for 51% of the business by Chinese energy and natural resources trader Guangdong Zhenrong Energy Co. Ltd (GDZR), a company statement has said.

Under the proposal, GDZR would pay HK$150 million to HK$200 million (USD $19.0 million to USD $25.8 million) for new shares in the company in return for "not less than" 51% of the enlarged share capital of Titan.

In addition GDZR will provide working capital for Titan of up to HK$320 million (approximately USD $40 million) subject to conditions including the dismissal of winding-up proceedings brought against Titan and its subsidiary in Bermuda and the British Virgin Islands by U.S. private equity firm Warburg Pincus, LLC (Warburg Pincus).

$10 million of the working capital could be made available upon adjournment of the proceedings for two months or longer.

Finally, GDZR will make funds available of up to HK$1,131 million (approximately USD $145 million) to buy out Warburg Pincus' interest in Titan made through Saturn Storage Limited (SSL) in Titan subsidiary StorageCo, and Saturn Petrochemical Holdings Ltd. (SPHL) in Titan.

Long-Term Benefit

Titan's board of directors said they believe that it is in the interests of both the shareholders and creditors of the company as a whole to pursue the discussions with GDZR based on the proposed terms.

"Guangdong Zhenrong Energy is a substantial and established player in the oil trading, commodities trading and logistics industry," commented Patrick Wong Siu Hung, Executive Director of Titan.

"This proposed investment will create a stable platform from which Titan can ride-out the current turbulent market conditions and develop its business, for the long-term benefit and in the best interests of all our stakeholders and creditors," he added.

The completion date for the deal was proposed as being on or before December 17, 2012.

GDZR's largest stakeholder at 44.3% is the Chinese state run Zhuhai Zhenrong Company.

The Beijing-based business made headlines in January after it was hit by U.S. sanctions, with the U.S. State Department saying it was the largest supplier of refined petroleum products to Iran.

Ship & Bunker reported last week that Titan was hit by legal action from Warburg Pincus who labeled it "insolvent and should be liquidated" after Titan was unable to meet redemptions for Preferred Shares and Convertible Notes.

Titan is also dealing with legal action brought by Grad China Logistics (GCL) to terminate the GCL transaction for the sale of the Titan terminal at Quanzhou and for the repayment of monies paid to Titan totaling RMB740 million, approximately HK$912.57 million (USD $118 million) plus interest.