China Aviation Oil, the troubled Chinese state-owned jet fuel importer, is expected to submit a revised debt restructuring plan on Thursday that will increase creditor payments to at least 50 per cent of the US$530m owed and reduce the repayment period from eight years, according to people familiar with the plan.
CAO, seeking court protection after losing US$550m in oil derivatives trading last year, is making the new offer to counter a suit filed by SK Energy, the South Korean oil refiner, to place the Singapore-listed company under the management of independent auditors.
Around half of CAO’s nearly 100 creditors have voiced opposition to its earlier offer to pay 41.5 cents on the dollar, with US$120m of the US$220m expected to be paid over eight years.
”Creditors will now have to look at the new plan to determine whether to support the move towards judical management,” said one person involved in the debt negotiations. “Many are now sitting on the fence.”
The Singapore High Court is scheduled to hold hearings on SK Energy’s proposed judicial management of CAO on May 26.
CAO’s claims that two-thirds of creditors oppose a move by the Court to appoint independent directors since CAO’s Beijing-based parent has threatened to withdraw support for a bail-out of the company if that happens.
CAO’s debt repayment plan is seen as a test case of how Chinese state-owned companies react to creditor concerns over the corporate governance of their listed overseas units.
The case has also drawn attention to Singapore’s efforts to attract mainland companies to list in the city-state.
The financial problems at CAO represented the Singapore’s biggest market scandal since the collapse of Barings Bank in 1995.
CAO’s parent has offered to inject US$100m into CAO through a proposed joint venture with Temasek Holdings, the Singapore state investment company.
The new capital would be used to pay back some of the debt immediately to creditors if they approve the restructuring plan at a meeting scheduled for June 10.
Get alerts on Front page when a new story is published