Unveiled last month, Yancoal sought to offer 2.32112 subordinated capital notes for every 1000 Yancoal shares held.

Yanzhou had already agreed to take up 78.3% of the $100 face value SCNs, with SCN holders to initially receive a 7% per annum distribution rate to be paid semi-annually with the first payment in June 2015.

However, a minority shareholder challenge to the Takeovers Panel was successful with the authority making a declaration of unacceptable circumstances.

ICN understands that the orders did not prevent the SCN offer from proceeding but did impact how Yanzhou may convert them – with Yanzhou requiring minority shareholder approval for any SCN conversion which takes its stake of Yancoal beyond its existing level of 78%.

“Yancoal is currently considering the Takeovers Panel’s decision and its next steps,” the company announced yesterday.

The SCN offer, plus Yanzhou’s move last month to provide Yancoal with up to $1.4 billion of additional financing via a 10-year loan facility, were part of an effort to protect Yancoal from the persisting coal market downturn.

Last month Yanzhou also agreed to ensure Yancoal continued to operate and remained solvent for as long as Yanzhou owns 51% of the coal company. Yancoal said Yanzhou could revoke this commitment but only by “giving not less than 24 months’ notice”

Yancoal, known as Felix Resources before Yanzhou acquired it in 2010, operates seven mines in Australia.

As part of the takeover conditions Yanzhou floated Yancoal in mid-2012.