Chinese giant CNNC controls fate of Paladin Chinese state-owned...

Chinese giant CNNC controls fate of Paladin

Chinese state-owned giant CNNC has enlisted Citic CLSA as its adviser in the increasingly tense wrestle to decide the fate of former high-flyer Paladin Energy.

The future of the uranium miner is in the balance, with CNNC to date refusing to waive an option — the validity of which has been questioned by Paladin — to buy Paladin’s remaining 75 per cent stake in the Langer Heinrich mine in Namibia.

But the option isn’t the only dagger held by Chinese parties.

The $US200 billion sovereign wealth fund China Investment Corporation is in a position to block the restructuring, given it holds 33 per cent of Paladin bonds due for repayment in 2020. Bondholders need to vote 75 per cent in favour of the restructure for it to go through, meaning CIC can also kill the deal and effectively consign Paladin to administration.

While such a move would see CIC lose most if not all of its investment, it could clear the way for CNNC to pick up the Paladin assets through a sale by any future administrators. CNNC is one of the most powerful state-owned companies in China, with responsibility not only for the country’s civil nuclear capacity but also its military nuclear program, and the expectation is that CIC would listen to any instruction from CNNC.

The bulk of other remaining bondholders have already given their blessing to the restructure. Kirkland and Gilbert + Tobin have been advising the non-Chinese bondholders, which include JPMorgan and Oaktree.

Should the worst happen and Paladin winds up in administration, CNNC would appear to have few rivals in any future auction of Langer Heinrich.

Uranium mines require a specialised skill set, putting them off limits to many traditional mining houses, and the likes of Rio Tinto and BHP, which derive only a tiny fraction of their total earnings from uranium, have made it clear they are losing interest in the sector.