Em­bat­tled ZTE seeks $10.7b credit line

The Gulf Today - Business - - INTERNATIONAL -

HONG KONG: Chi­nese telecom­mu­ni­ca­tions gi­ant ZTE Corp has pro­posed a $10.7 bil­lion fi­nanc­ing plan and nom­i­nated eight board mem­bers in a dras­tic man­age­ment over­haul, as it seeks to re­build a busi­ness crip­pled by a US sup­plier ban.

The news, an­nounced late on Wed­nes­day, in­di­cates China’s No.2 tele­com equip­ment maker is work­ing to­wards meet­ing con­di­tions laid out by the United States so it could re­sume busi­ness with Amer­i­can sup­pli­ers, who pro­vide about 25-30 per cent of the com­po­nents used in ZTE’S equip­ment.

In­vestors cheered the de­vel­op­ment, driv­ing up ZTE’S Hong Konglisted shares as much as 3.7 per cent on Thurs­day morn­ing.

A day ear­lier, em­bat­tled ZTE’S shares plunged a record 41 per cent in Hong Kong and 10 per cent in Shen­zhen, wip­ing al­most $3 bil­lion off its mar­ket value, as it re­sumed trad­ing af­ter be­ing sus­pended for al­most two months due to the US ban.

The United States im­posed the seven-year sup­plier ban on ZTE in April af­ter it broke an agree­ment to dis­ci­pline ex­ec­u­tives who con­spired to evade US sanc­tions on Iran and North Korea. ZTE last week agreed to pay a $1 bil­lion fine to the US govern­ment. The ban will, how­ever, not be lifted un­til ZTE pays the fine and places another $400 mil­lion in an escrow ac­count in a Us-approved bank for 10 years.

ZTE was also or­dered to rad­i­cally over­haul its man­age­ment and hire a U.s.-ap­pointed spe­cial com­pli­ance co­or­di­na­tor.

As part of its deal with the United States, ZTE needs to re­place its 14-per­son board and fire all lead­er­ship mem­bers at or above the se­nior vice pres­i­dent level, along with any ex­ec­u­tives or of­fi­cers tied to the wrong­do­ing. The US com­merce de­part­ment can ex­er­cise dis­cre­tion in grant­ing ex­cep­tions. In fil­ings late on Wed­nes­day, ZTE said its con­trol­ling share­holder, Zhongx­ingxin, had nom­i­nated 8 new board mem­bers.

That in­cluded 5 non-in­de­pen­dent di­rec­tors - Li Zixue, Li Buqing, Gu Jun­y­ing, Zhu Weimin, and Fang Rong - all from state-linked firms that are share­hold­ers of or have in­vest­ment re­la­tion­ships with Zhongx­ingxin.

The tele­com equip­ment maker also nom­i­nated eight board mem­bers in a dras­tic man­age­ment over­haul.

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