Asia Aluminum

Last updated
Asia Aluminum Holdings Limited
Company typePrivate
Industry Aluminum Extrusion
Founded1992
Headquarters Hong Kong, China
Area served
Global
Key people
Kwong Wui Chun (Chairman)
ProductsAluminum Extruded and Fabricated Products
Website www.asiaalumgroup.com

Asia Aluminum is the largest aluminum extrusion group in Asia, with an annual designed capacity of 350,000 metric tons. It employed, directly and indirectly, in excess of 10,000 people, predominantly in the Asia Aluminum Industrial City which housed its primary manufacturing facilities, located in the Zhaoqing region of the People's Republic of China. Asia Aluminum made its debut on the Hong Kong Stock Exchange in 1998.

Recent Events and Decline

In 2004, the Company issued Senior Notes which were listed on the Singapore Exchange, with a total principal amount of US$450,000,000. The Senior Notes were issued primarily to fund the construction of the Asia Aluminum Industrial City.

In 2006, with Merrill Lynch as financial advisers, the management of Asia Aluminum performed a leveraged buyout of the outstanding issued share capital in Asia Aluminum, financed by the issuance of US$535,000,000 in payment-in-kind notes (PIK notes), which were listed on the Singapore Exchange. After acquiring all outstanding shares, Asia Aluminum was delisted from the Hong Kong Stock Exchange.

The global economic downturn in 2008 and 2009 had a significant negative impact on the aluminium industry, including Asia Aluminum. Furthermore, Asia Aluminum incurred a considerable drain on its cash resources due to the construction of its flat rolled products facility.

At the end of 2008, the company reported its total assets to be US$2.4 billion with US$1.5 billion in liabilities. On 13 February 2009, Asia Aluminum management launched a tender offer to buy back the Senior Notes and PIK Notes at 27.5% and 13.5% of face value respectively. The offer was withdrawn after it failed to draw sufficient support from the respective noteholders.

As the company's financial condition deteriorated, it became the subject of PRC legal actions commenced by onshore creditors, which threatened its PRC assets. Demand letters were also issued against various Asia Aluminum Group entities by Hong Kong-based lenders. The demand letters triggered the cross default of the Senior Notes and the PIK Notes, causing in excess of US$985,000,000 of debt to become immediately due and payable. Asia Aluminum did not have sufficient funds to repay these debts. Consequently, as at 28 February 2009, Asia Aluminum was deemed insolvent both on a cash flow and a balance sheet basis. At the time, Asia Aluminum's total onshore and offshore debt was in the order of US$1,544,000,000. [1]

In March 2009, the company began liquidation proceedings in Hong Kong after management withdrew its tender offer for the Senior and PIK Notes. In the same month, the Hong Kong Court appointed FTI Consulting as provisional liquidator. When attempting to gain control of the company's mainland China subsidiaries, employees of FTI Consulting reported that both management and staff had been uncooperative.

Asia Aluminum's PRC assets had become under increasing threat of value deterioration due to the legal demands that had been commenced, which, if pursued, would have likely resulted in the auctioning off of the assets by the PRC Courts. Proceeds from the auction would have likely been distributed to onshore creditors first, and the likelihood of any return to offshore creditors from the PRC assets would have been significantly reduced if a return was achievable at all.

In view of this threat, FTI Consulting negotiated a non-exclusive agreement with limited terms to sell 100% equity in Asia Aluminum's PRC operating assets to a management buyout consortium. This structure allowed for the potential advent of a superior offer from another party and the ability of the Provisional Liquidators to secure information from management, which had not been forthcoming, on the onshore assets. This was considered the only way to avoid a PRC bankruptcy and ensure some level of returns to offshore creditors.

Despite significant media coverage of the sale, no other firm bids were tendered for Asia Aluminum's PRC assets. Norsk Hydro submitted an indicative bid for the company, but its bid was left to expire after it emerged that local authorities may oppose its bid and support a "restructuring proposal submitted by the management." [2]

Furthermore, the local authorities favoured a management buyout, as the authorities considered this the only option that would allow for social stability to be maintained in the region. The local government had negotiated a stay of local creditors and convinced local banks to allow Asia Aluminum to continue to draw on its working capital facilities. This allowed for operations to continue whilst a restructuring option could be negotiated. Therefore, any successful bidder needed to have the support of the local government and of local stakeholders. No interested parties proved to have this level of support.

In June 2009, the Hong Kong Court approved for the management team to purchase Asia Aluminum for US$475,000,000, generating returns of 18 cents on the dollar to Senior Noteholders and less than one cent on the dollar to PIK Noteholders. Obligations to Hong Kong lenders and onshore creditors were fully assumed by the management buyout consortium. As is characteristic of bankruptcy situations in China, a majority of Asia Aluminum's investors were unable to fully recoup their investments, and its management team now owns the US$2.4 billion business. [3] [4] [5] [6] [7]

Asia Aluminum is one of many bankruptcy failures of Chinese companies formerly listed on the Hong Kong Stock Exchange.

Related Research Articles

<span class="mw-page-title-main">Leveraged buyout</span> Acquired control over a company by the purchase of its shares with borrowed money

A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money (leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. The use of debt, which normally has a lower cost of capital than equity, serves to reduce the overall cost of financing the acquisition. This is done at the risk of magnified cash flow losses should the acquisition perform poorly after the buyout.

<span class="mw-page-title-main">PCCW</span> Hong Kong multinational telecommunications services company

PCCW Limited is a Hong Kong-based information and communication technology (ICT) and telecommunications company.

Midway Games Inc., known previously as Midway Manufacturing and Bally Midway, and commonly known as simply Midway, was an American video game developer and publisher. Midway's franchises included Mortal Kombat, Rampage, Spy Hunter, NBA Jam, Cruis'n and NFL Blitz. Midway also acquired the rights to video games that were originally developed by WMS Industries and Atari Games, such as Defender, Joust, Robotron: 2084, Gauntlet and the Rush series.

<span class="mw-page-title-main">Kohlberg Kravis Roberts</span> American investment manager

KKR & Co. Inc., also known as Kohlberg Kravis Roberts & Co., is an American global investment company that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate, credit, and, through its strategic partners, hedge funds. As of December 31, 2023, the firm had completed more than 730 private equity investments in portfolio companies with approximately $710 billion of total enterprise value. As of December 31, 2023, assets under management (AUM) and fee paying assets under management (FPAUM) were $553 billion and $446 billion, respectively.

<span class="mw-page-title-main">Canwest</span> Former Canadian media company

Canwest Global Communications Corporation, which operated under the corporate name Canwest, was a major Canadian media conglomerate based in Winnipeg, Manitoba, with its head offices at Canwest Place. It held radio, television broadcasting, and publishing assets in several countries, primarily in Canada.

A credit-linked note (CLN) is a form of funded credit derivative. It is structured as a security with an embedded credit default swap allowing the issuer to transfer a specific credit risk to credit investors. The issuer is not obligated to repay the debt if a specified event occurs. This eliminates a third-party insurance provider.

CNOOC Limited (中国海洋石油有限公司) is China's largest producer of offshore crude oil and natural gas, noted as such in 2010. It is a major subsidiary of China National Offshore Oil Corporation (CNOOC) and has been listed in Hong Kong SEHK: 883 since February 2001. It was listed on the New York Stock Exchange from 2001 to 2021. It was on the Toronto Stock Exchange between 2013 and 2021. It was admitted as a constituent stock of the Hang Seng Index in July 2001.

Alinta Limited was an Australian energy infrastructure company. It has grown from a small, Western Australia-based gas distributor and retailer to the largest energy infrastructure company in Australia. It was bought in 2007 by a consortium including Singapore Power and various parties which include the now defunct Babcock & Brown funds.

<span class="mw-page-title-main">Financial centre</span> Locations which are centres of financial activity

A financial centre or financial hub is a location with a significant concentration of participants in banking, asset management, insurance, and financial markets, with venues and supporting services for these activities to take place. Participants can include financial intermediaries, institutional investors, and issuers. Trading activity can take place on venues such as exchanges and involve clearing houses, although many transactions take place over-the-counter (OTC), directly between participants. Financial centres usually host companies that offer a wide range of financial services, for example relating to mergers and acquisitions, public offerings, or corporate actions; or which participate in other areas of finance, such as private equity, hedge funds, and reinsurance. Ancillary financial services include rating agencies, as well as provision of related professional services, particularly legal advice and accounting services.

A general assignment or assignment is a concept in bankruptcy law in which an insolvent entity's assets are assigned to someone as an alternative to a bankruptcy. One form is an "assignment for the benefit of creditors", abbreviated ABC or AFBC.

<span class="mw-page-title-main">Apollo Global Management</span> American private equity company

Apollo Global Management, Inc. is an American asset management firm that primarily invests in alternative assets. As of 2022, the company had $548 billion of assets under management, including $392 billion invested in credit, including mezzanine capital, hedge funds, non-performing loans, and collateralized loan obligations, $99 billion invested in private equity, and $46.2 billion invested in real assets, which includes real estate and infrastructure. The company invests money on behalf of pension funds, financial endowments, and sovereign wealth funds, as well as other institutional and individual investors.

<span class="mw-page-title-main">Bankruptcy of Lehman Brothers</span> 2008 bankruptcy of American investment bank

The bankruptcy of Lehman Brothers, also known as the Crash of '08 on September 15, 2008, was the climax of the subprime mortgage crisis. After the financial services firm was notified of a pending credit downgrade due to its heavy position in subprime mortgages, the Federal Reserve summoned several banks to negotiate financing for its reorganization. These discussions failed, and Lehman filed a Chapter 11 petition that remains the largest bankruptcy filing in U.S. history, involving more than US$600 billion in assets.

<span class="mw-page-title-main">Ares Management</span> American asset management company

Ares Management Corporation is a global alternative investment manager operating in the credit, private equity and real estate markets. The company was founded in 1997 with additional offices across North America, Europe, and Asia.

The 2009 General Motors Chapter 11 sale of the assets of automobile manufacturer General Motors and some of its subsidiaries was implemented through Chapter 11, Title 11, United States Code in the United States bankruptcy court for the Southern District of New York. The United States government-endorsed sale enabled the NGMCO Inc. to purchase the continuing operational assets of the old GM. Normal operations, including employee compensation, warranties, and other customer services were uninterrupted during the bankruptcy proceedings. Operations outside of the United States were not included in the court filing.

<span class="mw-page-title-main">Offshore financial centre</span> Corporate-focused tax havens

An offshore financial centre (OFC) is defined as a "country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy."

Shaw Media, Inc. was the television broadcasting division of Shaw Communications. It owned the Global Television Network, which broadcasts nationally via 13 television stations, as well as 19 specialty channels including Slice, HGTV Canada, Showcase, Food Network Canada, and History. Shaw Media consisted of the broadcasting assets of the former Canwest. Shaw Media properties were acquired in April 2016 by sister company Corus Entertainment.

Since the late-2000s, the People's Republic of China (PRC) has sought to internationalize its official currency, the Renminbi (RMB). RMB internationalization accelerated in 2009 when China established the dim sum bond market and expanded Cross-Border Trade RMB Settlement Pilot Project, which helps establish pools of offshore RMB liquidity. The RMB was the 8th-most-traded currency in the world in 2013 and the 7th-most-traded in early 2014. By the end of 2014, RMB ranked 5th as the most traded currency, according to SWIFT's report, at 2.2% of SWIFT payment behind JPY (2.7%), GBP (7.9%), EUR (28.3%) and USD (44.6%). In February 2015, RMB became the second most used currency for trade and services, and reached the ninth position in forex trading. The RMB Qualified Foreign Institutional Investor (RQFII) quotas were also extended to five other countries — the UK, Singapore, France, Korea, Germany, and Canada, each with the quotas of ¥80 billion except Canada and Singapore (¥50bn). Previously, only Hong Kong was allowed, with a ¥270 billion quota.

<span class="mw-page-title-main">Hong Kong insolvency law</span> Financial regulation in Hong Kong

Hong Kong insolvency law regulates the position of companies which are in financial distress and are unable to pay or provide for all of their debts or other obligations, and matters ancillary to and arising from financial distress. The law in this area is now primarily governed by the Companies Ordinance and the Companies Rules. Prior to 2012 Cap 32 was called the Companies Ordinance, but when the Companies Ordinance came into force in 2014, most of the provisions of Cap 32 were repealed except for the provisions relating to insolvency, which were retained and the statute was renamed to reflect its new principal focus.

<span class="mw-page-title-main">China CITIC Financial Asset Management</span> State-owned asset management company

China CITIC Financial Asset Management is a majority state-owned financial asset management company in China, with a focus on distressed debt management. It was one of the four asset management companies that the Government of China established in 1999 in response to the 1997 Asian financial crisis.

<span class="mw-page-title-main">Chinese property sector crisis (2020–present)</span> Financial crisis

The Chinese property sector crisis is a current financial crisis sparked by the 2021 default of Evergrande Group. Evergrande, and other Chinese property developers, experienced financial stress in the wake of overbuilding and subsequent new Chinese regulations on these companies' debt limits. The crisis spread beyond Evergrande in 2021 to such major property developers as Country Garden, Kaisa Group, Fantasia Holdings, Sunac, Sinic Holdings, and Modern Land.

References

  1. "Asia Debt Holders Squirm". Wall Street Journal. 25 August 2009.
  2. "Norsk Hydro Drops Plan to Acquire Asia Aluminum, WSJ Says - Bloomberg". Bloomberg News . 2012-10-26. Archived from the original on 2012-10-26. Retrieved 2023-05-25.
  3. "Food for thought | IFR".
  4. "Lumena high-yielder rings Asia Aluminum bells | IFR".
  5. "Aluminum listing can wait - the Standard". Archived from the original on 2011-06-04. Retrieved 2009-10-28.
  6. Santini, Laura (5 June 2009). "Hedge Funds Aim to Halt Asia Aluminum Sale". Wall Street Journal.
  7. "Investors lose battle for Asia Aluminum -- Intellasia.Net". Archived from the original on 2011-07-23. Retrieved 2010-08-25.