OREANDA-NEWS. Fitch Ratings says that the risks to China Shanshui Cement Group Limited (Shanshui, B+/RWN) from an early redemption of its USD500m notes due 2020 have reduced after a proposal to replace the company chairman and the majority of its board members was rejected at an extraordinary general meeting on 29 July 2015.

If the proposal had been approved, the change of control clause on the notes may have been triggered, requiring Shanshui to immediately redeem the 2020 notes. Failure to do so may have resulted in a default, resulting in potential cross defaults for the company's other debt. Although the immediate redemption risk has reduced, Shanshui has yet to resolve a shareholders' dispute that continues to affect its liquidity.

On 20 July 2015, Shanshui said that Asia Cement Corporation (ACC), which owns 20.90% of Shanshui, and China National Building Materials (CNBM), which owns 16.67%, are considering making a joint cash offer to acquire shares they do not already hold. This possible offer is non-binding and subject to further discussion between ACC and CNBM and the satisfaction of a number of conditions, including approvals from the boards and investment committees of the two potential buyers, and regulators. We think the potential acquisition by ACC and CNBM is a first step towards resolving the shareholder dispute. However, Fitch's Rating Watch Negative on Shanshui's ratings will only be resolved when there is greater clarity on how the company plans to address its liquidity and operational risks.