May 04, 2018 01:06 PM

CEFC Staff Go Unpaid as Former Highflier Flounders

CEFC China Energy headquarters in Shanghai. Photo: IC
CEFC China Energy headquarters in Shanghai. Photo: IC

CEFC China Energy, the once highflying conglomerate that is now conducting fire sales of its assets following an investigation into its chief, appears to be hitting rock-bottom.

Employees have not been paid for two months and are being offered severance packages, sources close to the company say, as creditors scramble to collect debts amid growing regulatory scrutiny of the firm.

Interviews with six current and former employees paint a picture of tumult at the one-time Fortune 500 company, with a growing malaise among staff members after its chairman, Ye Jianming, was revealed in February to be under investigation for suspected economic crimes.

CEFC amassed a large portfolio of assets in Europe, the Middle East, Central Asia and Africa before agreeing in September to buy a $9 billion stake in Russia’s state-controlled oil major Rosneft. It had more than 30,000 employees at its peak.

Caixin reported on March 1 that Ye, who is the chairman as well as founder, had been placed under investigation. The news sparked a sell-off of CEFC Shanghai bonds and cast uncertainty about how CEFC China’s deals will move ahead.

Now leaderless and at the mercy of circling creditors, CEFC is trying to shed assets in an effort to repay its extensive debt as banks and auditors pore over its financial statements. CEFC did not respond to requests for comment.

On April 26, staff at the Shanghai headquarters were offered a severance package of one month salary for each year worked, plus an extra month, said four people with knowledge of the matter. All declined to be identified by name because they were not authorized to speak to the media.

The deadline for acceptance was one day later.

“The contract is effective immediately,” said one person who accepted the offer.

Staff are also seeing other benefits, such as preferential rental rates for apartments slip away, the employees said.

At the end of April, a CEFC official said CEFC may cut half of its 30,000-strong workforce.

The swift crumbling of CEFC, which was founded in the coastal province of Fujian in 2002, has led to an exodus of employees and staff cuts.

For those who are left, hoping that things might turn around, a general malaise has set in, as mounds of paperwork for asset sales pile up, according to three people with knowledge of the situation.

“No one is working anymore,” said one person who accepted the severance package.

“Some people are looking for new jobs, some people are reading books,” the person said. “Some people are even openly playing cards.”

Creditors invade

Inside the plush, centrally located offices of CEFC in Shanghai, staff quickly realized in early March that their roles were changing.

China Development Bank, CEFC’s largest creditor, together with Shanghai Lixin Accounting Firm, sent around 100 people to CEFC’s offices, where they stayed for a month sifting through financial documents, according to one person with direct knowledge.

“We just had to serve them,” said one person who is still at CEFC, adding that staff were told to be compliant and provide them with whatever they needed. Some employees found themselves having to handle disgruntled creditors, fielding questions they could not answer, and facing lines of people in the office worried about their loans.

On Thursday, creditors organized a sit-in at the Shanghai headquarters around 9 a.m., according to one person with direct knowledge. They were disbanded by the police, but CEFC employees were unable to enter the building during the protest.

Employees in CEFC’s once-acquisitive investment team are handling the sale of assets they helped to acquire, and wondering if sales deals they forged will be unwound once a new plan for the company is in place.

“Nobody knows what’s happening. It’s a case of wait and see,” said one person in the team.

To stay or go

CEFC had been an attractive employer even though salaries were not high, according to multiple current and former employees. There were opportunities to travel to places like Europe and Hong Kong.

For some midlevel employees in the research department, salaries were in the range of 300,000 yuan ($47,200) a year, which is below the market rate, according to one employee. But junior staff in investment teams who dealt with acquisitions could receive bonuses of up to five months of their salary.

Some division managers at the company’s Shanghai headquarters and Beijing office have told staff at internal meetings to pursue new jobs.

Those who have decided not to take the severance package will have to wait for the results of how the company will be handled by the government and creditors.

All teams reporting directly to Ye, the chairman now under investigation, will likely be axed, said one person with direct knowledge of the matter.

In the firm’s internal WeChat group, some staff dealt with the turmoil at the office with a touch of humor.

“At least we’re not the bankers,” one person said.

Reuters — Caixin

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