Shanshui Cement Bonds Jump Most in Two Months on Unit Takeover

  • Firm has faced concerns about management dispute with unit
  • Seals for subsidiaries found though not for Shandong Shanshui

China Shanshui Cement Group Ltd.’s bonds jumped after the company said it has taken over the headquarters of its main operating unit following a management dispute.

The manufacturer “has smoothly taken over the headquarters and additional three factories” of the unit Shandong Shanshui Cement Group Ltd. with the assistance of the local police in the northern city of Jinan, it said in a filing dated Jan. 31. Its $500 million of 7.5 percent notes due 2020 rose 3.4 cents on the dollar to 71.9 cents, set for the biggest daily increase since Nov. 18, according to prices compiled by Bloomberg.

The firm, which defaulted on onshore debt last year, announced plans in January to repay the 2020 securities. Concern had risen as new management backed by shareholder Tianrui Group Co. struggled to take over the unit following a shareholder vote. China Shanshui is taking stock of important documents as well as fixed assets of Shandong Shanshui, and all company stamps except for Shandong Shanshui have been found and returned, it said in the statement.

“The takeover of Shandong Shanshui is a significant development in this prolonged power struggle between Tianrui and the former management,” said Ross Lee, credit analyst at Bank of China Hong Kong Ltd. “The assistance from the local police indicates the local government’s support to the management transition. The successful takeover of Shandong Shanshui would provide some clarity to the repayment of the 2020 notes.”

Competing Suits

China Shanshui had filed legal actions against Shandong Shanshui’s former directors last month to restrain them from acting on what it called unlawfully altered articles of association of the unit. The unit responded with its own suits alleging that China Shanshui released “false and illegal statements.”

Tianrui Group is in the process of getting a syndicated loan arranged by Industrial & Commercial Bank of China Ltd. to repay Shanshui’s notes, people familiar with the matter said last month. ICBC is in talks with banks including Bank of China Ltd., Agricultural Bank of China Ltd., China Construction Bank Corp., Bank of Communications Co. and China Everbright Bank Co. as potential lenders for the syndicated deal, the people had said.

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