Chinese entrepreneur Chen Deshun’s high-profile takeover of CSC Phoenix appears to be ending on a sour note.
Chen’s Tianjin Shunhang Shipping — which is CSC Phoenix’s controlling shareholder — has applied for liquidation under a bankruptcy procedure, according to an exchange filing from Shenzhen-listed CSC Phoenix.
It says Tianjin Shunhang is insolvent and could not repay its debts in full, with total assets of CNY 3.73bn ($552m) and liabilities of CNY 3.82bn.
Tianjin No 2 Intermediate People’s Court is seeking an administrator for its case but has yet to formally accept the bankruptcy application.
“If Tianjin Shunhang enters the bankruptcy procedure, we might have a different controlling shareholder,” CSC Phoenix said.
In 2015, Tianjin Shunhang acquired nearly 17.9% of CSC Phoenix from Sinotrans & CSC, a rare case in Chinese shipping where a private entity took over an entire unit from a state conglomerate.
The deal was meant to give Chen’s non-shipping assets a back-door listing when fresh initial public offerings on the Shanghai and Shenzhen bourses were on hold.
Based on the deal, Chen was supposed to transfer all the shipping assets, liabilities and personnel back to Sinotrans and CSC in 2016 for free before injecting his harbour dredge and port construction business into CSC Phoenix.
Plan flopped
However, the plan fell apart as Chen’s business could not secure an official licence for major port projects, according to exchange filings.
In early 2017, Tianjin Shunhang announced it would sell its stake in CSC Phoenix to Guangdong Wenhua Furui, a retailer, for CNY 1.9bn.
Wenhua Furui eventually dropped out of the deal after questioning CSC Phoenix’s debt issues.
Last year, Sinotrans & CSC took Tianjin Shunhang to the court for its failure in completing the 2015 deal, with Wenhua Furui a joint liability. The company won compensation of CNY 266m.
Sinotrans & CSC also took back more than 10 bulkers earlier on bareboat charters to CSC Phoenix, triggering the resignations of dozens of its employees in shipping operations.
The company has been merged into China Merchants Group, another state conglomerate.
It is not immediately known how many ships remain in CSC Phoenix’s fleet, which focuses on domestic bulker trades and shipping services.
The company said in exchange filings that it was disposing of assets but did not provide further details.
CSC Phoenix expected its 2018 net profit to range between CNY 52m and CNY 70m, mainly due to earnings from asset sales.
