On Monday, the beleaguered China Aviation Oil Singapore Corp proposed to pay off 41.5 percent of its debts in an attempt to avoid the city-state's largest bankruptcy in a decade.
The company offered to reimburse creditors with US$100 million in cash. Another US$120 million would be paid off over a period of eight years, according to the restructuring plan it filed with the Singapore High Court.
It added that it would receive a cash injection of up to US$100 million from its parent firm, the Beijing-based China Aviation Oil Holding Company (CAOHC).
If approved, the plan could provide a lifeline to China's once-foremost jet fuel supplier.
The company collapsed and requested bankruptcy protection late November after losing US$550 million in oil derivatives trading. It was Singapore's biggest trading scandal since the collapse of Barings Bank in 1995.
CAO owes its parent company US$118 million and a further US$530 million to other creditors, including Goldman Sachs, Mitsui & Co Ltd, Sumitomo Mitsui Banking Corp and SK Energy.
The statement said CAOHC will not participate in cash distribution, and may convert its credit into a discount on CAO shares.
The repayment plan has to be approved at a creditors meeting on June 10; if they cannot agree to it, CAO will be liquidated.
The company's statement said CAOHC had also invited the Singapore state investment agency Temasek Holdings Pte Ltd to inject fresh capital into the company: "The two parties have been engaged in and continue to be engaged in discussions with respect to the proposed investment."
Analysts said Temasek's participation would be conditional on creditors approving the debt-restructuring plan and on the final outcome of investigations by Singapore authorities into the scandal.
The CAO case is the largest scandal so far involving a Chinese state-owned company listed overseas.
Its collapse has aroused widespread concern over the credibility of Chinese companies listed on the Singapore market, with mainland companies' shares experiencing massive losses there since the scandal was exposed.
The Chinese authorities have criticized CAO's oil futures trading business for seriously violating government regulations.
They are requiring Chinese enterprises to establish sound supervision and risk management mechanisms in an attempt to avoid a repeat of the situation.
CAO's suspended chief executive, Chen Jiulin, is on bail and remains under investigation.
The 43-year-old was chosen as one of the "New Asian Leaders" by the World Economic Forum in 2004.
(China Daily January 25, 2004)
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