& cplSiteName &

ZTE Seeks $11B in Credit, Nominates New Board Members – Report

Iain Morris
6/14/2018
50%
50%

Following its resumption of trading yesterday, ZTE is looking to raise about $10.7 billion in financing as it tries to get its business back on track, according to press reports.

The Chinese vendor has also nominated eight board members in a management shake-up that comes in response to US demands.

ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) was banned from acquiring US components earlier this year after it was charged with violating sanctions against Iran and North Korea. The company stopped trading in Hong Kong on April 16 and ceased all business operations in early May.

The ban was recently lifted after ZTE reached an agreement with the US Commerce Department. Under that deal, it will pay a $1 billion fine, place $400 million in "escrow" as a suspended penalty payment and fire anyone at or above the level of senior vice president. (See ZTE Tanks on Trading Resumption, Ejects Entire Management Team .)

ZTE's share price closed down 42% in Hong Kong yesterday, reflecting investors' concern about the outlook for the Chinese vendor, and it was down another 1% today after the latest developments.

According to a report from Reuters, ZTE's board has applied for a $10.7 billion credit line, which includes about $4.7 billion from the Bank of China and $6 billion from China Development Bank.

The company was reported to have racked up losses of around $3 billion as it continued to pay staff and for other expenses while it was unable to sell gear. Up to 80% of its products were said to use components from US suppliers, according to earlier press reports.

ZTE reported a net profit of about 1.7 billion Chinese yuan ($270 million) on revenues of nearly RMB29 billion ($4.5 billion) for the first three months of this year.

A $10.7 billion loan would cover some of the vendor's losses, allow it to pay a $1 billion fine in the next two months and help it with sales and marketing efforts as it returns to full operations.

ZTE customers have been reviewing their contracts with the Chinese company amid concern the US ban would drive it out of business.


For all the latest news from the wireless networking and services sector, check out our dedicated Mobile content channel here on Light Reading.


Besides seeking a $10.7 billion loan, ZTE has nominated five non-independent directors from shareholders in ZTE or companies that have investment links to the business, reports Reuters.

Another three individuals have been nominated as independent, non-executive directors.

After investigating company filings, Reuters concluded that about 40 executives would lose their jobs as a result of ZTE's management cull.

US authorities were angry that ZTE failed to properly discipline executives after it was originally penalized for breaching sanctions last year.

Charged with selling equipment that included US-made components to Iran and North Korea, ZTE was fined nearly $900 million in 2017. The penalty wiped out company profits for 2016, but ZTE had reported a strong first quarter of 2018 before the recent US moves against it.

Under its agreement with the US Commerce Department, ZTE has agreed to install a "compliance" team that will report to its board as well as to US authorities.

— Iain Morris, International Editor, Light Reading

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Featured Video
From The Founder
John Chambers is still as passionate about business and innovation as he ever was at Cisco, finds Steve Saunders.
Flash Poll
Upcoming Live Events
June 26, 2018, Nice, France
September 12, 2018, Los Angeles, CA
September 24-26, 2018, Westin Westminster, Denver
October 9, 2018, The Westin Times Square, New York
October 23, 2018, Georgia World Congress Centre, Atlanta, GA
November 7-8, 2018, London, United Kingdom
November 8, 2018, The Montcalm by Marble Arch, London
November 15, 2018, The Westin Times Square, New York
December 4-6, 2018, Lisbon, Portugal
All Upcoming Live Events
Hot Topics
Telco Job Prospects Go From Bad to Worse
Iain Morris, News Editor, 6/22/2018
Larry Ellison Laughed at the Cloud, Now the Cloud Is Laughing Back
Mitch Wagner, Executive Editor, Light Reading, 6/20/2018
Mavenir's Billion-Dollar Blueprint
Ray Le Maistre, Editor-in-Chief, 6/18/2018
5G Transport – Where Do We Start?
Ray Le Maistre, Editor-in-Chief, 6/21/2018
Animals with Phones
Backing Up Your Work Is Crucial Click Here
Live Digital Audio

A CSP's digital transformation involves so much more than technology. Crucial – and often most challenging – is the cultural transformation that goes along with it. As Sigma's Chief Technology Officer, Catherine Michel has extensive experience with technology as she leads the company's entire product portfolio and strategy. But she's also no stranger to merging technology and culture, having taken a company — Tribold — from inception to acquisition (by Sigma in 2013), and she continues to advise service providers on how to drive their own transformations. This impressive female leader and vocal advocate for other women in the industry will join Women in Comms for a live radio show to discuss all things digital transformation, including the cultural transformation that goes along with it.

Like Us on Facebook
Twitter Feed