Battle for Shanshui Cement Escalates to Entangle China Mayorby , , and
Shanshui seeks injunction to retrieve official company seals
Firm's 2020 notes have fallen about 21.5 cents in past year
The battle for control of China Shanshui Cement Group Ltd.’s assets escalated to a new high as one of the parties announced it was taking legal action against the mayor of the city where most of the company’s operations are based.
Shareholders backed by Tianrui Group Co. acquired control of China Shanshui Cement’s board late last year through a hostile takeover but have since struggled to wrest control of the company’s assets away from its previous managers. Tianrui is a cement maker based in the province of Henan, which neighbors the province of Shandong where most of Shanshui’s assets are.
In the latest step, two units controlled by the new board have taken legal action in Hong Kong against Yang Luyu, mayor of Jinan, and his deputy, Su Shuwei, according to a filing to Hong Kong’s stock exchange. They’re seeking an injunction that would force local authorities to help retrieve official company seals, books and records from the company’s former managers.
“It is interesting that the action against the Jinan mayor is now being taken in Hong Kong, suggesting that attempts to access courts in Jinan may have been frustrated,” said Charles Macgregor, head of Asian high-yield research in Singapore at Lucror Analytics. “Bondholders are increasingly facing a binary outcome with respect to Shanshui’s dollar notes.”
Jinan Mayor Yang, in Beijing for the annual meeting of China’s legislature, declined to comment on the move.
The Tianrui-backed management is also seeking an injunction that would stop the city government from recognizing Shanshui Cement’s founder Zhang Caikui, former chairman Zhang Bin and Chen Xueshi as directors of Shandong Shanshui, China Shanshui’s main onshore operating unit, according to the filing.
The legal action follows a statement issued last month by Hong Kong-listed China Shanshui, which is controlled by the Tianrui-backed investors, that accused officials in Jinan of interfering with management and its ability to control Shandong Shanshui.
China Shanshui’s 7.5 percent $500 million notes rose 0.2 cents on the dollar to 78.4 cents as of 5:28 p.m in Hong Kong. They have fallen about 21.5 cents in the past year.