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China Development Bank has put up for sale a 4-percent interest in ADNOC owned by troubled conglomerate CEFC, which earlier this year became the target of a government investigation into its chief executive Ye Jianming as part of a wider crackdown on illicit business practices.
The ADNOC stake is part of a fire sale of assets owned by the heavily indebted company, the South China Morning Post reports, and the frontrunners are Hengli Group, the parent company of Hengi Petrochemical, and defense major Norinco.
Earlier this year, there were reports that Citic Group was doing due diligence on the ADNOC stake, but according to the sources who spoke to the SCMP, the company had quit the race. The company bought CEFC’s assets in the Czech Republic earlier.
The stake in the UAE’s biggest oil company, which CEFC bought for US$900 million in 2017, is only one of the assets that CEFC’s creditors will try to sell. It represents some 2 million barrels per month in crude oil production that the owner has the right to market, Reuters reports. The inventory also includes a lot of real estate across the globe.
CEFC notably planned to buy a hefty stake in Rosneft for some US$9 billion, but the deal fell through amid the company’s debt troubles.
It is widely believed that CEFC’s chief executive, who stepped down in March, attracted the attention of financial regulators as part of a crackdown on large Chinese companies suspected of reckless spending, which heightens financial risk in the country.
After Ye stepped down, the SCMP recalls, CEFC’s creditors stopped lending to the company, which had become China’s largest private energy conglomerate, and it started disintegrating, pressured by a debt load of US$14.3 billion, of which US$4.39 billion was in the form of bonds (30 billion yuan). The first default came soon after, in May.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.