China Huarong Energy : Announcements and Notices - (1) Proposed Grant of Specific Mandate (2) Proposed Share Consolidation (3) Proposed Change in Board Lot Size and (4) Proposed increase in Authorised Share Capital

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This announcement is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of China Huarong Energy Company Limited.

CHINA HUARONG ENERGY COMPANY LIMITED

中國華榮能源股份有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 01101)

1. PROPOSED GRANT OF SPECIFIC MANDATE
2. PROPOSED SHARE CONSOLIDATION
3. PROPOSED CHANGE IN BOARD LOT SIZE AND
4. PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

Reference is made to the announcement of the Company dated 19 November 2015 in relation to the proposal for the issue of shares of the Company in order to satisfy certain liabilities with the relevant institutional creditors.

In light of the depressed shipbuilding market, the Group has encountered operational difficulties. The Company proposes to conduct the Disposal of Liabilities, aiming to adjust and optimise the business of the Group and to dispose the relevant liabilities of the Group, including but not limited to those in relation to the shipbuilding business of the Group, in order to ease the debt burden of the Group.

DISPOSAL OF LIABILITIES AND SUBSCRIPTION AGREEMENTS

The Disposal of Liabilities proposed by the Company comprises:

1. the Disposal of Liabilities in relation to the Bank Creditors, under which the Company proposes to enter into Bank Creditor Subscription Agreements with the relevant Bank Creditors or their Designated Entities; and

   
   

2. the Disposal of Liabilities in relation to the Supplier Creditors, under which the Company proposes to enter into the Supplier Creditor Subscription Agreements with the relevant Supplier Creditors or their Designated Entities.

Bank Creditor Subscription Agreements

The Company proposes to enter into the Bank Creditor Subscription Agreements with the Bank Creditors or their Designated Entities, pursuant to which the Bank Creditors or their Designated Entities shall conditionally agree to subscribe for, or procure their respective nominee(s) to subscribe for, and the Company shall conditionally agree to allot and issue, up to 14,108,000,000 Subscription Shares at the Subscription Price of HK$1.20 per Subscription Share, to satisfy the Relevant Borrowings in an aggregate amount of up to RMB14,108,000,000 (equivalent to approximately HK$16,929,600,000) due from the Group to the Bank Creditors.

Supplier Creditor Subscription Agreements

The Company proposes to enter into the Supplier Creditor Subscription Agreements with the Supplier Creditors or their Designated Entities, pursuant to which the Supplier Creditors or their Designated Entities shall conditionally agree to subscribe for, or procure their respective nominee(s) to subscribe for, and the Company shall conditionally agree to allot and issue, up to 3,000,000,000 Subscription Shares at the Subscription Price of HK$1.20 per Subscription Share, to satisfy the Relevant Payables in an aggregate amount of up to RMB3,000,000,000 (equivalent to approximately HK$3,600,000,000) due from the Group to the Supplier Creditors.

SPECIFIC MANDATE

The Board proposes to seek the grant of the Specific Mandate from the Shareholders at the EGM to allot and issue the Subscription Shares (up to an aggregate amount of not more than 17,108,000,000 new Consolidated Shares) to the Creditors or their Designated Entities.

PROPOSED SHARE CONSOLIDATION

The Board proposes to implement the Share Consolidation on the basis that every five (5) issued and unissued Shares of HK$0.10 each in the existing share capital of the Company will be consolidated into one (1) Consolidated Share of HK$0.50 each.

Proposed Change in Board Lot Size

The Board also proposes to change the board lot size for trading in the shares of the Company from 500 Shares to 2,000 Consolidated Shares upon the Share Consolidation becoming effective.

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

In order to facilitate the issue of the Subscription Shares under the Specific Mandate and to provide the Company with greater flexibility to raise funds by allotting and issuing Consolidated Shares in the future as and when necessary, the Board also proposes to, immediately upon the Share Consolidation becoming effective, increase the authorised share capital of the Company

from HK$3,800,000,000 divided into 7,600,000,000 Consolidated Shares of HK$0.50 each to HK$30,000,000,000 divided into 60,000,000,000 Consolidated Shares of HK$0.50 each by the creation of an additional 52,400,000,000 unissued Consolidated Shares, which shall rank pari passu with the then existing Consolidated Shares.

GENERAL

An EGM will be convened for the Shareholders to consider and, if thought fit, to approve, inter alia, (i) the Share Consolidation; (ii) the Increase in Authorised Share Capital; and (iii) the grant of the Specific Mandate to the Directors for the allotment and issue of the Subscription Shares.

A circular containing, among other things, further information on the Share Consolidation, the Increase in Authorised Share Capital and the Specific Mandate, and the notice of the EGM is expected to be despatched to the Shareholders as soon as practicable.

Shareholders and potential investors should be aware of and take note that the Share Consolidation is conditional upon satisfaction of the conditions precedent set out in the sub- section headed "Proposed Share Consolidation - Conditions of the Share Consolidation". Besides, the Change in Board Lot Size is conditional upon the Share Consolidation becoming effective. Therefore, the Share Consolidation and the Change in Board Lot Size may or may not proceed. Shareholders and potential investors are advised to exercise caution when dealing in the Shares, and if they are in any doubt about their position, they should consult their professional advisers.

Shareholders of the Company and/or potential investors are also reminded that the Subscriptions may or may not proceed. The Subscriptions are subject to, among other things, the entering into of the definitive Subscription Agreements, the terms of which are yet to be finalised. The Subscriptions are also subject to and conditional upon such conditions as may be agreed by the parties to the Subscription Agreements. There is no assurance as to whether and when the Subscriptions will take place and as to the number of Subscription Shares to be issued even if the Subscriptions proceed to completion. Shareholders and potential investors of the Company are advised to exercise caution when dealing in the Shares.

INTRODUCTION

Reference is made to the announcement of the Company dated 19 November 2015 in relation to the proposal for the issue of shares of the Company in order to satisfy certain liabilities with the relevant institutional creditors.

In light of the depressed shipbuilding market, the Group has encountered operational difficulties. The Company proposes to conduct the Disposal of Liabilities, aiming to adjust and optimise the business of the Group and to dispose the relevant liabilities of the Group, including but not limited to those in relation to the shipbuilding business of the Group, in order to ease the debt burden of the Group.

DISPOSAL OF LIABILITIES AND SUBSCRIPTION AGREEMENTS

The Disposal of Liabilities proposed by the Company comprises:

1. the Disposal of Liabilities in relation to the Bank Creditors, under which the Company proposes to enter into Bank Creditor Subscription Agreements with the relevant Bank Creditors or their Designated Entities; and

   
   

2. the Disposal of Liabilities in relation to the Supplier Creditors, under which the Company proposes to enter into the Supplier Creditor Subscription Agreements with the relevant Supplier Creditors or their Designated Entities.

Bank Creditor Subscription Agreements

The Company proposes to enter into the Bank Creditor Subscription Agreements with the Bank Creditors or their Designated Entities, pursuant to which the Bank Creditors or their Designated Entities shall conditionally agree to subscribe for, or procure their respective nominee(s) to subscribe for, and the Company shall conditionally agree to allot and issue, up to 14,108,000,000 Subscription Shares at the Subscription Price of HK$1.20 per Subscription Share, to satisfy the Relevant Borrowings in an aggregate amount of up to RMB14,108,000,000 (equivalent to approximately HK$16,929,600,000) due from the Group to the Bank Creditors.

Certain of the Relevant Borrowings are secured by (i) the raw materials, land use rights, buildings, plant and machinery, vessels under construction, pledged deposits, available-for-sale financial assets and guarantees of the Group; (ii) guarantees from Mr. Chen, certain Shareholders and their related parties (including Mr. Zhang Dehuang (the father of Mr. Zhang), Gallop Sun, Leader World and Outspace); and (iii) land use rights, buildings, plant and equipment and share capital of certain related parties described in (ii) above.

Supplier Creditor Subscription Agreements

The Company proposes to enter into the Supplier Creditor Subscription Agreements with the Supplier Creditors or their Designated Entities, pursuant to which the Supplier Creditors or their Designated Entities shall conditionally agree to subscribe for, or procure their respective nominee(s) to subscribe for, and the Company shall conditionally agree to allot and issue, up to 3,000,000,000 Subscription Shares at the Subscription Price of HK$1.20 per Subscription Share, to satisfy the Relevant Payables in an aggregate amount of up to RMB3,000,000,000 (equivalent to approximately HK$3,600,000,000) due from the Group to the Supplier Creditors.