Titan considers stake sale as Warburg takes legal action

Titan said in a regulatory filing that it is negotiating an issue of new shares that, if successful, would likely result in a change of control of the company. Titan reported an annual net loss of HK$783.3 million ($101 million) for the most recent fiscal year and its shares were suspended from trading on June 19 after falling 50% over the previous 12 months, cutting the company's market value to HK$1.92 billion.

Titan accumulated significant debts and then found itself brutally exposed when the global financial crisis created a sharp downturn in the shipping industry. It defaulted on HK$825.8 million of principal and HK$35.1 million on interest due on US dollar-denominated bonds on March 19, blaming the failure to sell off a shipyard to Grand China Logistics, a unit of HNA Group.

The company hasn't turned a profit in five years and assets exceeded liabilities by HK$1.24 billion at the end of last year.

Warburg Pincus has invested more than $215 million in Titan since 2007 and currently holds a stake of around 10%. On June 18, Saturn Storage, a vehicle wholly-owned by the private equity firm, exercised its redemption rights on HK$1.36 billion in preferred shares and HK$273 million in convertible notes issued by the subsidiary through which Titan controls its China onshore storage business.

The same day, Saturn Storage applied to the Eastern Caribbean Supreme Court in the British Virgin Islands for the business to be liquidated. On June 21, Titan received an offer to purchase 51% of the subsidiary for approximately $260 million.

On July 4, Saturn Petrochemical Holdings, another Warburg Pincus vehicle, served notice to Titan that it wanted to redeem 555 million outstanding shares in the company plus any accrued and unpaid dividends for a total consideration of HK$384 million. Five days later, Saturn Petrochemical asked the Supreme Court of Bermuda to start liquidation proceedings on Titan.

The petition is expected to be heard on August 16.

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• Topics
• Restructuring
• Greater China
• Industrials
• Buyout
• Warburg Pincus Asia
• China
• Logistics
• Commodities
• Distress