Warburg Pincus Says Titan Proposal is Unrealistic

Warburg Pincus says its alternative proposal will deliver a superior return to stakeholders.

Warburg Pincus, LLC (Warburg Pincus) said in a press release Friday that a proposal by Titan Petrochemicals Group Ltd. (Titan) [HKG:1192] to resolve its current financial woes "has significant flaws, appears unrealistic, is still very preliminary, highly conditional and lacking in several critical details."

The statement said there was also no clear plan as to how the business would be turned around after five years of accumulated losses amounting to HKD $3.53 billion (USD $452.6 million) and its proposal to extend its debt obligations by 7 to 10 years would not resolve Titan's "manifest insolvency, but simply defers the problem yet again."

"The inability of [Titan's] management team to address the fundamental problems facing its business have been clearly demonstrated," it said.

The U.S. private equity firm has invested more than $215 million in Titan, and a court hearing in the British Virgin Islands ruled on July 17, 2012 its StorageCo entity is to be liquidated following a winding up petition brought against it by Warburg Pincus.

Alternative Proposal

The firm now says that its SouthernPec Corporation (SP) and Saturn Storage Limited (SSL) entities, who it also says is the biggest creditor of StorageCo, have formed a joint venture entity to submit an alternative joint restructuring proposal to the liquidators, believing it will deliver a superior return to stakeholders.

Titan responded saying it has not received notice of the details of the joint venture or joint restructuring proposal, and that they are still in discussions with the liquidators to acquire the StorageCo group.

"Having not seen any details of these plans, we are unable to evaluate whether this is the case. However, we note that Titan's bondholders and shareholders would not derive any benefit from these plans," Titan said in a emailed statement.

Titan also revealed Friday that on August 16, 2012 Grad China Logistics (GCL) filed a notice supporting the liquidation petition.

GCL have separately brought legal proceedings against Titan and two of its subsidiaries to terminate their purchase of Titan's Quanzhou terminal and for the repayment of monies paid to Titan totalling RMB740 million, approximately HK$912.57 million (US $118 million) plus interest.

Also on Friday, Titan said that at the first hearing of the liquidation petition in Bermuda on August 16, 2012 the court adjourned the hearing until September 5, 2012.

"We are pleased that the court has granted an extension. This important decision recognises the complexity of the situation and diverse interests of all the parties involved," a Titan company spokesman said.