Bank demands payment for two outstanding sums of S$1.02m and US$12.5m
By LYNETTE KHOO 6 December 2008
Another Chinese company listed in Singapore has a credit line snapped after it defaulted on payment. Zhonghui Holdings said that it has received a letter of demand from United Overseas Bank (UOB) on Wednesday to repay two outstanding sums - S$1.02 million and US$12.5 million - within seven days. UOB is also seeking payment of interest accrued on the outstanding sums.
‘The company is in the process of responding to the bank accordingly,’ Zhonghui said in an announcement. It also said that the company is trying to divest its investment in an associated company to help to repay the bank debt and will keep investors informed.
Last year, Zhonghui entered into agreement with UOB for a short-term loan facility and a term loan facility for an aggregate amount of up to US$13.2 million and an overdraft facility of up to S$1 million to finance an acquisition by its wholly owned subsidiary.
The subsidiary, Shaanxi Zhonghui Environmental Conservation Corporation, acquired a 42.06 per cent stake in Baoji ZhongCheng Machine Tooling Co from Shaanxi Guangtai Industry (Guangtai) in June 2007 for 218.89 million yuan (S$48.5 million).
But UOB had to revise its repayment schedule for Zhonghui in July this year, with US$9.56 million to be progressively paid between August and November and US$2.2 million by Jan 3, 2009. Zhonghui had planned to partially divest its stake in Baoji to repay the loan.
Last month, Zhonghui appointed PricewaterhouseCoopers as special accountants to assess its financial position.
PwC’s scope of review also included Zhonghui’s investment in Baoji and the status of a proposed acquisition relating to management right to operate a solid waste treatment plant in Xi’an.
These were issues raised by former independent director Lim Lian Soon, who had resigned a month earlier, citing unsatisfactory information flow from the executive directors on these matters.
Zhonghui’s financial controller Emily Ang also resigned in May and was replaced by Cui Chengji as finance manager in June. Horwath First Trust notified the company in July of their wish to resign as auditors of the company.
For fiscal 2007 and the first nine months of 2008, Zhonghui would have been in the red had it not recognised profits from its stake in Baoji. Its third quarter ended Sept 30 results, which did not include results from Baoji, saw net losses widen to 9.92 million yuan from 5.34 million yuan as it recorded zero turnover, but incurred operating expenses.
As at Sept 30, its short-term bank loan and bank overdraft amounted to 85.5 million yuan and was in net current liabilities of 103 million yuan. Its investment in Baoji was valued at 252 million yuan.
The group had said in its Q3 financial statement: ‘In the event the company is unable to divest off, or it has to divest its associated company at a significantly lower value, the company may not be able to meet its obligations to the bank. This may raise doubts as to whether the company would continue as a going concern.’
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UOB seeks loan repayment from Zhonghui
Bank demands payment for two outstanding sums of S$1.02m and US$12.5m
By LYNETTE KHOO
6 December 2008
Another Chinese company listed in Singapore has a credit line snapped after it defaulted on payment. Zhonghui Holdings said that it has received a letter of demand from United Overseas Bank (UOB) on Wednesday to repay two outstanding sums - S$1.02 million and US$12.5 million - within seven days. UOB is also seeking payment of interest accrued on the outstanding sums.
‘The company is in the process of responding to the bank accordingly,’ Zhonghui said in an announcement. It also said that the company is trying to divest its investment in an associated company to help to repay the bank debt and will keep investors informed.
Last year, Zhonghui entered into agreement with UOB for a short-term loan facility and a term loan facility for an aggregate amount of up to US$13.2 million and an overdraft facility of up to S$1 million to finance an acquisition by its wholly owned subsidiary.
The subsidiary, Shaanxi Zhonghui Environmental Conservation Corporation, acquired a 42.06 per cent stake in Baoji ZhongCheng Machine Tooling Co from Shaanxi Guangtai Industry (Guangtai) in June 2007 for 218.89 million yuan (S$48.5 million).
But UOB had to revise its repayment schedule for Zhonghui in July this year, with US$9.56 million to be progressively paid between August and November and US$2.2 million by Jan 3, 2009. Zhonghui had planned to partially divest its stake in Baoji to repay the loan.
Last month, Zhonghui appointed PricewaterhouseCoopers as special accountants to assess its financial position.
PwC’s scope of review also included Zhonghui’s investment in Baoji and the status of a proposed acquisition relating to management right to operate a solid waste treatment plant in Xi’an.
These were issues raised by former independent director Lim Lian Soon, who had resigned a month earlier, citing unsatisfactory information flow from the executive directors on these matters.
Zhonghui’s financial controller Emily Ang also resigned in May and was replaced by Cui Chengji as finance manager in June. Horwath First Trust notified the company in July of their wish to resign as auditors of the company.
For fiscal 2007 and the first nine months of 2008, Zhonghui would have been in the red had it not recognised profits from its stake in Baoji. Its third quarter ended Sept 30 results, which did not include results from Baoji, saw net losses widen to 9.92 million yuan from 5.34 million yuan as it recorded zero turnover, but incurred operating expenses.
As at Sept 30, its short-term bank loan and bank overdraft amounted to 85.5 million yuan and was in net current liabilities of 103 million yuan. Its investment in Baoji was valued at 252 million yuan.
The group had said in its Q3 financial statement: ‘In the event the company is unable to divest off, or it has to divest its associated company at a significantly lower value, the company may not be able to meet its obligations to the bank. This may raise doubts as to whether the company would continue as a going concern.’
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