JES International Holdings has sold its shipbuilding business to distressed debt investor Hong Kong Victo International Limited for a cash consideration of $500,000 plus a possible adjustment fee.
The wholly owned subsidiaries being sold are China’s Jiangsu New East Marine Equipment Co (JNEME) and Jiangsu Eastern Heavy Industry Co (JEHI). JES is also selling 49% of the registered capital of Jiangsu Nereus Shipyard Co (JNS). Together, the companies’ registered capital is worth some $230.8m.
The purchaser will assume responsibility for the shipyards’ known bank debts of RMB 1,956,550,278 ($297,573,374), which outnumbers their combined fixed asset value of RMB 1,531,127,489 ($232,867,920), according to JES’ 4Q 2015 results.
JES International said it offered to sell the businesses to “several established shipbuilding companies” in China, but all declined “due to the high level of known bank debts and the delay in the proposed restructuring”.
Efforts to restructure JEHI have been stalled by courts in China. JEHI’s application for its proposed restructuring with certain creditors was rejected by the Taizhou Intermediate People’s Court in Jiangsu Province and is now pending appeal in Jiangsu High People’s Court.
JES International said the delay has caused “problems in engaging investors to commit to any form of investment. Almost all interested investors have indicated that they will only either invest in or bring business into [JES International] if the disposal companies are no longer part of the company”.
Hong Kong Victo International has agreed to continue JEHI’s court appeal process and indemnify JES International from costs, losses and liabilities related to the proposed restructuring up to the value of S$50,000.