HONG KONG • Chinese telecommunications giant ZTE Corp has proposed a US$10.7 billion (S$14.3 billion) financing plan and nominated eight new 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 that China's No. 2 telecom equipment maker is working towards meeting conditions laid out by the United States so it can resume business with American suppliers, who provide about 25 per cent to 30 per cent of the components used in its equipment.
Investors cheered the development, driving up ZTE's Hong Kong-listed shares as much as 3.7 per cent yesterday 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 US$3 billion off its market value.
The US 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 US$1 billion fine to the US government. The ban will, however, not be lifted until ZTE pays the fine and places another US$400 million in an escrow account in a US-approved bank for 10 years.
ZTE was also ordered to overhaul its management and hire a US-appointed special compliance coordinator.
As part of its deal, 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.
In filings late on Wednesday, ZTE said that its controlling shareholder Zhongxingxin, which has a 30.34 per cent stake, had nominated eight new board members.
They included five non-independent directors from state-linked firms that are shareholders of or have investment relationships with Zhongxingxin.
Voting on this will take place at an annual general meeting on June 29.
According to a Reuters estimate based on company filings and a source with knowledge of the matter, ZTE's management overhaul could result in about 40 senior executives being replaced.
But it can find most candidates internally, said Jefferies analyst Edison Lee. "That is feasible, though it will, of course, cause confusion and slow down decision-making."