The current credit crunch has claimed its second casualty among Singapore-listed China companies.
Worsening credit woes faced by some clients of Bio-Treat Technology have dragged the water-treatment company into the red for its full year ended June 30.
In an adjustment to its preliminary full year results, Bio-Treat raised its bad debt provision from 139.5 million yuan ($29.8 million) to 532.6 million yuan, a jump of 393.1 million yuan.
‘Certain customers have no access to funding currently and have suddenly found themselves to be in a dire financial state,’ Bio-Treat said in an announcement.
Bio-Treat also reported an impairment loss of about 120 million yuan, citing cost over-run arising from significant increase in raw material costs. It said that there is a possibility of it receiving compensation from the municipal government upon project completion.
The total additional provision for bad debt and cost over-run is about 531.1 million yuan. This resulted in Bio-Treat suffering a net loss of 413.9 million yuan, instead of an earlier reported net profit of 125.43 million yuan.
When commenting on its preliminary full-year results last month, Bio-Treat told BT that the bad debt provision was fully provided for. It even expressed optimism in recovering payments in due course. It had then reported a 62 per cent slump in net profit from 330.35 million yuan in fiscal 2007, largely due to customers in three to four projects defaulting in payment.
Bio-Treat said that the adjustment in bad debt provision reflects growing difficulties to recover trade receivables caused by macroeconomic controls implemented in China last year and the current credit squeeze.
But it believes that further provisions would not be necessary.
Dealers perceive this news from Bio-Treat as no surprise after FerroChina was rendered insolvent last week from a cash flow shortfall and cut in credit lines.
‘FerroChina has started the ball rolling. We can expect more of this FerroChina story to come,’ said a local broker. Companies that are involved in convertible bonds, have short-term debts or loans due to mature soon are most vulnerable, he added.
But Bio-Treat yesterday assured that it is able to meet its current working capital requirements and short-term financial obligations, apart from the debt arising from its seven-year convertible bonds (CBs) programme issued in 2006.
Its short-term loan obligations include bank borrowings of about 44.4 million yuan and an outstanding loan of 211.5 million yuan from substantial shareholder Precious Wise Group. It will use part of its revenue from water tariffs to repay bank borrowings and work out a repayment plan with Precious Wise which had, after the fiscal year ended June 30, allowed Bio-Treat to further draw down some HK$35 million ($6.6 million).
The group is discussing with its bankers to arrange a bridging loan to make partial settlement with the CB holders and is negotiating with these bondholders on the convertible bonds, which are in default. Bio-Treat had said that it needed to raise a further $80 million for the CBs that were due.
For the construction of its BOT projects, Bio-Treat said that it has secured sufficient long-term loans.
Almost all of its BOT projects, with the exception of the three BOT projects secured in the first half of this year, will be completed and start commercial operations by the first half of 2009. The annualised revenue from these BOT projects is estimated to hit at least 300 million yuan.
‘To date, none of the credit facilities granted by our group’s bankers have been frozen,’ Bio-Treat’s chief executive Chan Kong said.
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Clients’ Credit Woes Behind Bio-Treat Losses
By LYNETTE KHOO
15 October 2008
The current credit crunch has claimed its second casualty among Singapore-listed China companies.
Worsening credit woes faced by some clients of Bio-Treat Technology have dragged the water-treatment company into the red for its full year ended June 30.
In an adjustment to its preliminary full year results, Bio-Treat raised its bad debt provision from 139.5 million yuan ($29.8 million) to 532.6 million yuan, a jump of 393.1 million yuan.
‘Certain customers have no access to funding currently and have suddenly found themselves to be in a dire financial state,’ Bio-Treat said in an announcement.
Bio-Treat also reported an impairment loss of about 120 million yuan, citing cost over-run arising from significant increase in raw material costs. It said that there is a possibility of it receiving compensation from the municipal government upon project completion.
The total additional provision for bad debt and cost over-run is about 531.1 million yuan. This resulted in Bio-Treat suffering a net loss of 413.9 million yuan, instead of an earlier reported net profit of 125.43 million yuan.
When commenting on its preliminary full-year results last month, Bio-Treat told BT that the bad debt provision was fully provided for. It even expressed optimism in recovering payments in due course. It had then reported a 62 per cent slump in net profit from 330.35 million yuan in fiscal 2007, largely due to customers in three to four projects defaulting in payment.
Bio-Treat said that the adjustment in bad debt provision reflects growing difficulties to recover trade receivables caused by macroeconomic controls implemented in China last year and the current credit squeeze.
But it believes that further provisions would not be necessary.
Dealers perceive this news from Bio-Treat as no surprise after FerroChina was rendered insolvent last week from a cash flow shortfall and cut in credit lines.
‘FerroChina has started the ball rolling. We can expect more of this FerroChina story to come,’ said a local broker. Companies that are involved in convertible bonds, have short-term debts or loans due to mature soon are most vulnerable, he added.
But Bio-Treat yesterday assured that it is able to meet its current working capital requirements and short-term financial obligations, apart from the debt arising from its seven-year convertible bonds (CBs) programme issued in 2006.
Its short-term loan obligations include bank borrowings of about 44.4 million yuan and an outstanding loan of 211.5 million yuan from substantial shareholder Precious Wise Group. It will use part of its revenue from water tariffs to repay bank borrowings and work out a repayment plan with Precious Wise which had, after the fiscal year ended June 30, allowed Bio-Treat to further draw down some HK$35 million ($6.6 million).
The group is discussing with its bankers to arrange a bridging loan to make partial settlement with the CB holders and is negotiating with these bondholders on the convertible bonds, which are in default. Bio-Treat had said that it needed to raise a further $80 million for the CBs that were due.
For the construction of its BOT projects, Bio-Treat said that it has secured sufficient long-term loans.
Almost all of its BOT projects, with the exception of the three BOT projects secured in the first half of this year, will be completed and start commercial operations by the first half of 2009. The annualised revenue from these BOT projects is estimated to hit at least 300 million yuan.
‘To date, none of the credit facilities granted by our group’s bankers have been frozen,’ Bio-Treat’s chief executive Chan Kong said.
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