Asia Aluminum Plans New Tactic to Gain Support for Bond Buyback

By Tom Kohn

March 3 (Bloomberg) -- Asia Aluminum Holdings Ltd. Chairman Kwong Wui Chun, who offered his shares to investors to win support for a restructuring plan and debt buyback offer, now plans to shock bondholders into agreement.

“I want to present the real difficulty that the company is facing,” Kwong said in an interview in Hong Kong yesterday. “I want to give investors a picture of the situation” by sharing a liquidation analysis report prepared by a consulting firm, he said, without naming the company.

Kwong on Feb. 27 sent a letter to investors offering his shares in Asia Aluminum’s parent if investors accept a bond buyback offer and guarantee that the company won’t go into liquidation, employees won’t be fired and banks and suppliers won’t suffer losses.

Asia Aluminum, the region’s biggest maker of extruded aluminum, on Feb. 13 offered to pay as much as 27.5 cents on the dollar for its 8 percent notes due 2011 while parent AA Investments Co. offered 13.5 cents for pay-in-kind notes as part of a “crucial” restructuring. Trade association EMTA and Aberdeen Asset Management Plc on Feb. 26 hosted a call for holders of the 8 percent notes in which all participants agreed not to sell at the offer price, according to Bondcritic.com analyst Warut Promboon.

Since the offer, customers have threatened cancellations and suppliers who previously extended credit have demanded cash, Kwong said. Deputy Chairman and Chief Executive Officer Benby Chan Yiu Tsuan resigned “to pursue his own interests,” the company said in a filing yesterday.

‘Peanuts’

A buyback at the offer price would mean bondholders get “peanuts” while shareholders and bank lenders “walk away with a much lighter debt burden,” according to Dubai-based investor Sami Caracand, who said he and his family own $250,000 of the 8 percent notes.

Standard & Poor’s cut Asia Aluminum’s credit rating by five grades to CC on Feb. 16 after the company said a slump in sales and cashflow coincided with a need to finance factory production and pressure on working capital. Investors have until May 18 to accept the buyback, with an “early consent” date on March 10.

Kwong tried in vain to sell parts of Asia Aluminum for more than a year and fought to avoid bankruptcy because of his concern for the future of the company’s 10,000 workers in southern China, he said.

Asia Aluminum has said it aims to get help from a Chinese municipal government to fund its buyback and has letters of intent from China Construction Bank Corp. and Bank of China Ltd. to provide loans if the tender is successful.

To contact the reporter for this story: Tom Kohn in Hong Kong at tkohn@bloomberg.net