CITI Group Inc and Citadel Investment Group LLC are among foreign creditors forming a plan to seize and sell the assets of FerroChina Ltd., a Chinese steel maker that owes about US$1 billion, three people involved in the matter have said.
The creditors hired London-based law firm Clifford Chance LLP to help them recoup US$130 million of bonds due 2011 and US$160 million of loans, said the people, who declined to be identified because the information isn't public. CLSA Capital Partners and Credit Suisse Group AG are also seeking recoveries, they said.
Singapore-listed FerroChina on October 9 said it suspended production and is unable to repay 706 million yuan (US$103 million) of loans because of the "current economic crisis." A further 4.5 billion yuan of local debt is at risk should restructuring talks with lenders and potential investors fail, it said.
If a company goes bankrupt in China, investors can expect to receive an average 36 cents on the dollar, compared with a 79-percent recovery rate in Hong Kong and 76 percent in the United States, according to New York-based law firm Weil, Gotshal & Manges LLP, which is overseeing Lehman Brothers Holdings Inc's bankruptcy. Chinese domestic corporate bond sales more than doubled this year to 176 billion yuan, data compiled by Bloomberg News show, as companies expanded in the world's fastest-growing major economy.
China's bankruptcy law of June 2007 provides equal treatment for state and privately-owned companies, including foreign investors. A creditor can apply to a Chinese court to recognize or enforce a foreign court's judgment involving a debtor's assets in China.
Jiangsu Province-based FerroChina on October 29 said six of its units face 169 lawsuits lodged in China by creditors and suppliers, without naming the claimants. The creditors appointed PricewaterhouseCoopers LLP as receiver for shares in two of FerroChina's units, Chief Executive She Chun Tai said in a Singapore stock exchange filing.
(Shanghai Daily November 7, 2008)
