CITIC signs contract to acquire CEFC’s Czech assets after 10-month long standoff with creditors
Apr 09, 2019 (China Knowledge) - State-owned conglomerate CITIC Group has finally signed a contract with indebted CEFC China Energy to take over its Czech assets for EUR 147 million after a 10-month long dispute with the company’s creditors over the price of its assets.
Last week, CITIC’s Rainbow Wisdom Investments units signed the deal with PricewaterhouseCoopers, the liquidator assigned to handle the company’s asset sales with the price agreed triple that of CITIC’s initial offer.
Despite this, many of the company’s creditors are still dissatisfied with the offer and plan to challenge the deal with some believing that the Czech assets could be worth up to EUR 530 million.
CEFC China had in the past acquired a sprawling network of overseas assets through debt-fueled investments. However, the company came under fire after its founder Ye Jianming was investigated by the Chinese government for economic crimes, leading to multiple downgrades in the credit ratings of the company’s units, triggering a debt crisis which rendered the company insolvent.
Following CEFC’s insolvency, CITIC then came in to bailout the company, agreeing to takeover the former’s Czech assets and repay some of its debt. However, the deal for the company’s Czech assets could not be finalized due to disagreements over its valuation.
According to PricewaterhouseCoopers, valuing CEFC’s assets had been difficult due to the complex debt network between CEFC and its units and the limited information it had.
Locked into this dispute, CITIC issued an ultimatum to CEFC’s creditors in March this year to accept its offer which was close to is appraised value of EUR 157 million by the end of the month, if not CITIC would then demand back the money it had provided in the company’s bailout which would further erode the value of the company’s remaining assets.
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