CEFC China Energy’s plans to buy a $9.1 billion stake in Russia’s Rosneft are still viable even as the embattled company faces financial strife and intense regulatory scrutiny, Bloomberg reported on Wednesday citing an official. CEFC may cut half of its 30,000-strong workforce, the report said, citing Zhuang Jianzhong, vice-director of the company’s international research unit.
“We are trying to streamline our business and staff, and hope we can make it through this difficult time,” Zhuang said on the sidelines of an energy conference in Shanghai, according to Bloomberg and Reuters.
His comment comes after CEFC’s founder and chairman Ye Jianming was revealed last month to be under investigation for suspected economic crimes.
Chinese authorities have barred senior staff at the conglomerate from traveling overseas.
CEFC’s deal to buy a 14.16 percent stake in Rosneft has been uncertain after Ye’s investigation raised concerns about the company’s high short-term debt load and the lack of transparency over its ownership, while the Chinese government aims to restructure the company.
State-controlled China Huarong Asset Management Co has taken a 36.2 percent stake in CEFC Hainan International, the unit that is acquiring the Rosneft stake.
State-run CITIC Group is conducting due diligence in the possibility it may purchase CEFC’s stake in onshore oil fields in Abu Dhabi.
Previously, Blooomberg reported that CEFC Shanghai International Group Ltd., a unit of the privately-held CEFC China Energy Co.- which takes over Rompetrol in Romania – failed to repay 2 billion yuan ($313 million) of bonds but said it will seek to pay back the notes in six months, according to a statement on the Shanghai Clearing House website. The unit said a week ago it may not be able to repay the notes because its chairman’s failure to “fulfill normal responsibilities” had a huge impact on the company’s operations.
Worries among investors about surging default rates in China are deepening after at least four nonpayments in the onshore market over the past month. Given the magnitude of the CEFC’s debt load, market stability will hinge on how it implements a debt workout plan, according to Fitch Ratings, quoted by Bloomberg.
The firm’s rapid ascent peaked with its agreement in September to buy a $9 billion stake in Russian oil behemoth Rosneft PJSC. That deal fell apart this month as financial troubles emerged after its chairman, Ye Jianming, came under investigation by Chinese authorities and stepped down from management.
The company relied heavily on bond sales for funding over the past two years and its borrowing costs have jumped since Ye was put under investigation, shutting it out from funding in this market.
While creditors to CEFC China Energy have formed a committee to review its asset disposals amid rising pressure to repay debt, Czech financial group J&T Private Investments has decided to take control of the management of the CEFC Europe because of the failure of the parent company to repay debt on time, China’s official Xinhua News Agency reported May 19. CEFC Europe is a Czech-based European branch of the Chinese conglomerate CEFC China Energy.