* Tsann Kuen says Zhangzhou govt studying how to support local subsidiaries
* B-shares no longer only way foreigners to buy shares in Chinese firms
* Local governments have stepped in to support several companies
By Pete Sweeney
SHANGHAI, Aug 14 (Reuters) - Tsann Kuen (China) Enterprise Co Ltd, the first company at risk of ejection from China’s troubled B-share board after regulators tightened delisting rules, said on Tuesday that a local government is considering steps to support one of its main subsidiaries.
Tsann Kuen, a small household electronics manufacturer based in Xiamen in the southeast province of Fujian, caused a panic in China’s B-share market late last month when it announced it was at risk of being forcibly delisted for failing to meet a new 1 yuan “par value” standard for B-share prices.
In a statement published on the Shenzhen stock exchange’s website on Tuesday, Tsann Kuen said the local government in Fujian’s Zhangzhou city has established a working group to study how to support the company’s operations in the city, given the impact a delisting by the parent would potentially have on the local economy.
“The local government hopes it can provide appropriate help and support to Zhangzhou Tsann Kuen at the right time.”
The company suspended trading in its shares on August 2 after spending 18 days trading below par, two days before the delisting rule would have automatically kicked in.
B shares are shares in Chinese companies denominated in U.S. or Hong Kong dollars which can be bought and sold by both Chinese citizens and foreigners. Once the only way foreigners could buy shares in Chinese companies, the market for B shares has since been rendered largely irrelevant by reforms allowing Chinese companies to list abroad.
The Zhangzhou government’s public relations office did not answer calls from Reuters to confirm that it was considering ways to help. But if that help is forthcoming it would be postive for the parent company’s prospects, according to Cao Xuefeng, analyst at Huaxi Securities in Chengdu.
“If a local government supports a subsidiary’s development, that indicates positive prospects for the company as a whole.”
In addition to its headquarters in Xiamen, Tsann Kuen has eight subsidiaries in China, but the three entities in the city of Zhangzhou make up the bulk of the company’s assets.
Tsann Kuenn’s shareholdings in Zhangzhou have a total value of 124 million yuan, representing 75 percent of the value of the parent’s total subsidiary shares.
Local governments in China have a track record of moving in to keep favored local employers out of trouble.
For example, a technically insolvent textile company Shandong Helon was saved from default on 400 million yuan in commercial paper by a last minute bailout from the local government of Weifang city.
Similarly, the government of Xinyu city, in Jiangxi province, announced it would use taxpayer funds to repay the loans of LDK Solar, a U.S.-listed solar equipment manufacturer.
However, the Tsann Kuen case is slightly different in that analysts say the company could avoid delisting without any bailout by executing a reverse stock split that would push its share value back above the regulatory minimum.
In addition, while the company admitted to posting a loss in the first half of the 2012 in the statement, the delisting threat is unrelated to its financial condition and the company is not facing imminent bankruptcy.
Cao of Huaxi Securities said Tsann Kuen managers were likely to be considering whether it is worth maintaining their B share ticker at all.
“I don’t think staying on the B-share board does much for their interests. It’s not as good as delisting from the B shares and relisting on the A-share market.” (Editing by Simon Cameron-Moore)