Warburg forms JV to restructure Titan subsidiary

If the joint proposal is accepted, it is expected to provide TGIL - which was placed into liquidation - with contingent working capital, management and a restructuring plan. Warburg Pincus and SouthernPec will continue to support the company after the completion of the deal, with the aim of facilitating the future growth of TGIL and its expansion outside China.

The liquidators of TGIL - Patrick Cowley, Edward Middleton and Russell Crumpler of KPMG and Stuart McKellar of Zolfo Cooper - were appointed in July by the Eastern Caribbean Supreme Court at the High Court of Justice, British Virgin Islands.

Established in 2002, SouthernPec is an integrated company in the energy and petrochemical industry with business covering trade, logistics, manufacturing and project investment.

"With SouthernPec's experienced senior management team and strong operational team, we are confident that the joint venture would be able to help the TGIL Group ride out its current difficult situation and ensure its business continuity," said Bo Bai, executive director at Warburg Pincus. "We believe we are very well positioned to assist the liquidators in ensuring the long term stability of the TGIL Group going forward, which will benefit all stakeholders."

Titan Petrochemicals, TGIL's parent company, said on Wednesday it will issue 7 billion new shares to Zhenrong - an oil and commodity trader partly owned by state-run Zhuhai Zhenrong Corp - at HK$0.025 each, representing nearly 90% of Titan's enlarged share capital. As part of the transaction, Zhenrong will pay up to $145 million to buy Warburg Pincus' interest in Titan's storage companies in China.

The acquisition, however, is subject to a dismissal of the Warburg suit. Last month, Warburg Pincus sued the company and some of its executives, citing misrepresentation and breaches of contract.

Warburg has invested more than $215 million in Titan Petrochemicals since 2007 and currently holds a stake of around 10%. 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.

The private equity player is said to consider the Zhenrong acquisition proposal to be premature and will go on with its petition to wind up Titan Petrochemicals through a court battle. Sources claim that obtaining court approval to hire an independent liquidator would be more transparent and fair to Titan's bond holders and other creditors, however.

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• Topics
• Greater China
• Restructuring
• Industrials
• China
• Warburg Pincus Asia
• Distress