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CHINA Shanshui Cement Group Ltd., which defaulted on bonds last year after a shareholder tussle, faces a mounting management dispute after a unit filed a lawsuit against it.
Shandong Shanshui Cement Group Ltd., its main operating arm, accused China Shanshui of spreading rumors and filed suit in a court in the eastern city of Jinan alleging it released “false and illegal statements,” according to an announcement on the unit’s website yesterday.
Investors in China Shanshui have been showing growing concern as the company struggles to settle internal disagreements, after its biggest shareholder Tianrui Group Co. won shareholder approval in December to oust former directors including chairman Zhang Bin. The Shandong unit said last week it may not be able to repay 1.8 billion yuan (US$280 million) in bonds due Jan. 21.
“Given the situation is complex, I don’t think there’s an easy solution to this without resolving the shareholder’s dispute,” said Ross Lee, a credit analyst at Bank of China Hong Kong Ltd. “The 2020 bonds should remain volatile as we see many headline news ahead.”
China Shanshui said in a statement Thursday that authorities in Jinan refused to proceed with an application for change of directors of the Shandong unit. The parent said in the filing last week that some former directors of the unit “illegally retain” documents.
Henry Li, who still identifies himself as chief financial officer of Shandong Shanshui despite a China Shanshui filing Dec. 3 that said he had been terminated effective that day, said Shandong Shanshui sees no possibility of repaying the bonds in principal or interest due Jan. 21.
Liu Yiu Keung, executive director at China Shanshui, said the company hasn’t received any summons from the Jinan court. He declined to comment further citing exchange rules.
“On Shanshui, I think things are getting out of control now and will need the government’s ‘almighty’ hand to resolve issues,” said Zhi Weifeng, a credit analyst with Standard Chartered Plc. in Singapore.
(SD-Agencies)
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