China Shanshui Liquidation Application Rejected by Cayman Court

  • Company will host an extraordinary general meeting on Dec. 1
  • The decision brings its major shareholders back to table: BOC

China Shanshui Cement Group Ltd. failed in its attempt to liquidate its business after the Grand Court in the Cayman Islands rejected its application to do so, clearing a path for major shareholders to work out a way for the company to repay debt.

Shanshui said the court ruled that the company’s directors didn’t have the authority to present a winding-up petition on behalf of the company, according to a filing to the Hong Kong stock exchange. The firm, based in the eastern Chinese province of Shandong but incorporated in the Cayman Islands, filed a liquidation application earlier this month, saying in a statement that the action aims to reduce the risk of the company being “destabilized by creditor action.”

Shanshui failed to repay 2 billion yuan ($313 million) of onshore notes two weeks ago as a shareholder fight hurt financing, becoming at least the sixth Chinese firm to renege on local notes this year and triggering default on its dollar debentures. The company will host an extraordinary general meeting on Dec. 1, in which shareholders will vote whether to remove the current board.

“The Cayman liquidation application rejection will bring Shanshui’s major shareholders back to the table to work out a resolution with the board for the ongoing shareholder dispute that has been hindering the development of the repayment of onshore and offshore debts,” said Ross Lee, a credit analyst at Bank of China Hong Kong Ltd.

Tianrui Group Co., Shanshui’s biggest shareholder, said in a Nov. 17 filing it would lend funds if its proposed restructure of the cement company’s board occurs and triggers early repayment of Shanshui’s $500 million of 2020 bonds. Asia Cement Corp., also a major shareholder, has $800 million in financing available to support any Shanshui recapitalization.

Domestic lenders to Shanshui are asking the company to provide collateral for their loans, amid worries that the defaulter would not be able to repay its debts, Henry Li, the firm’s chief executive officer, said on Nov. 20. Shanshui’s $500 million notes reversed an earlier fall to rise 0.3 cent to 83 cents on the dollar as of 4:56 p.m. in Hong Kong.

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