July 18, 2012 / 2:31 AM / 5 years ago

Chinese state oil trader to take control Titan after Warburg suit

HONG KONG, July 18 (Reuters) - Debt-laden Titan Petrochemicals Group Ltd, facing a lawsuit seeking its liquidation from U.S. private equity firm Warburg Pincus, said it has received a proposal from a Chinese oil trader to take control of the shipping and oil storage firm.

Titan, which said last week it was in talks to sell a controlling stake, has suffered losses for five consecutive years after its debt-driven growth strategy came undone during a sharp downturn in the shipping industry.

Under the proposal, state-owned Guangdong Zhenrong Energy Co would pay up to HK$200 million ($25 million) to subscribe for new shares representing not less than 51 percent of the enlarged share capital of Titan, Titan said in a filing with the Hong Kong stock exchange.

In addition, Zhenrong would set aside HK$1.13 billion in preparation to buy Warburg Pincus’ interest in Titan, and also provide Titan with financing of up to $40 million.

“This proposed investment will create a stable platform from which Titan can ride out the current turbulent market conditions and develop its business,” Titan executive director Patrick Wong said in the statement.

Guangdong Zhenrong is controlled by state-owned Zhuhai Zhenrong Co -- formerly an affiliate of China’s defence industry and now one of the country’s five biggest traders of crude oil and oil products.

Warburg Pincus filed a petition in a Bermuda court earlier this month seeking to wind up Titan, whose assets totalled HK$6.4 billion ($825 million) as of the end of last year while current liabilities reached HK$7.7 billion.

The private equity firm has invested more than $215 million in Titan since 2007 and holds a stake of around 10 percent.

Shares in Titan, which has a market value of $248 million, were suspended on June 19 pending an announcement of price-sensitive information. The stock last traded at HK$0.246, after plunging 50 percent in the last 12 months.

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