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Saturday, 30 May 2009
THEN: Hotshot investment manager, NOW: Fund sues him over FerroChina losses
The fallout from the sudden collapse of debt-laden, Singapore-listed Chinese steel coil-maker FerroChina last October has spread to affect former hotshot investment manager Lee Chong Min.
THEN: Hotshot investment manager, NOW: Fund sues him over FerroChina losses
Goh Eng Yeow 29 May 2009
The fallout from the sudden collapse of debt-laden, Singapore-listed Chinese steel coil-maker FerroChina last October has spread to affect former hotshot investment manager Lee Chong Min.
One of Mr. Lee’s own investment funds is suing him and his firm in an attempt to recover massive losses that it incurred by investing in the failed company.
Documents seen by The Straits Times show that CMIA China Fund II is suing Mr. Lee and his boutique fund management firm, CMIA Capital Partners.
Although the fund is seeking unspecified damages, the losses which it suffered could possibly run into hundreds of millions of dollars.
Prior to FerroChina’s collapse, the funds managed by Mr. Lee were collectively FerroChina’s No. 2 shareholder, holding 14.01 per cent of the company. This stake was worth as much as $240 million in December 2007, when the company’s stock price soared to $2.12.
It is now effectively worth nothing. The stock was suspended from trading last October after FerroChina’s business collapsed because banks refused to roll over the company’s loans of 706 million yuan (S$150 million).
Mr. Lee, who is in his 40s, has admitted to losing $30 million at the age of 35, only to bounce back to become one of the most sought-after fund managers in Singapore until the recent market mayhem.
He told The Straits Times yesterday that he would vigorously defend himself against the lawsuit. ‘At this point, it is not appropriate for us to comment, as it is a matter before the court,’ he said.
Besides FerroChina, his funds had also invested in other Singapore-listed China firms, or S-chips, such as C&O Pharmaceutical Technology and Midsouth Holdings, which was delisted from the Singapore Exchange last year.
CMIA China Fund II alleged in its statement of claim that in July 2007, its board of directors instructed Mr. Lee to sell off a stake it owned in another steel mill in China as soon as possible.
Mr. Lee, however, had already made separate arrangements to swop the stake for 46.5 million FerroChina shares three months earlier. CMIA China Fund II claimed its board was told of the arrangement only on March 31 last year - long after the stake had been converted into FerroChina shares.
‘If the board’s approval had been sought for the FerroChina share exchange, it would not have been granted,’ it said. This was because the share swop included a 12-month ‘lock-up’ period which prevented any sale of the new FerroChina shares until Oct 30 last year - a period which coincided with the collapse of the steel coil-maker.
The fund also alleged that Mr. Lee then compounded the problem by secretly pledging its assets as collateral to support his own borrowings.
In its statement of claim, it is also seeking restitution for its purported failure to list on the London’s Alternative Investment Market because of a conflict of interest which arose from Mr. Lee managing another fund.
‘Mr. Lee and CMIA Capital Partners had never previously disclosed any such conflict of interests...As a consequence, the plaintiff’s ability to seek a listing as agreed in January 2007 had been destroyed or indefinitely delayed,’ it said.
For the 3,800 shareholders of FerroChina, however, the revelations thrown up as a result of the legal tussle between Mr. Lee and CMIA China Fund II might shed light on the circumstances leading to the company’s sudden collapse.
One aggrieved investor, Mr. Kwok, who owns 50,000 FerroChina shares, said: ‘The current state of affairs at FerroChina is very unsatisfactory. Even though we may have to write off our losses, at least let us know what is going on.’
Since its trading suspension, there has been a dearth of information on the firm.
In March, FerroChina said the mainland court administrator, which had been appointed to manage its business, had yet to give it a ‘meaningful update’ on the restructuring plan for its China units.
It was also unable to give an update of its financial status, as the audit conducted by the administrator was not finished.
That same month, chief financial officer Soh Wai Kong resigned to pursue another ‘career opportunity’.
FerroChina could not be contacted for comment on the lawsuit.
2 comments:
THEN: Hotshot investment manager, NOW: Fund sues him over FerroChina losses
Goh Eng Yeow
29 May 2009
The fallout from the sudden collapse of debt-laden, Singapore-listed Chinese steel coil-maker FerroChina last October has spread to affect former hotshot investment manager Lee Chong Min.
One of Mr. Lee’s own investment funds is suing him and his firm in an attempt to recover massive losses that it incurred by investing in the failed company.
Documents seen by The Straits Times show that CMIA China Fund II is suing Mr. Lee and his boutique fund management firm, CMIA Capital Partners.
Although the fund is seeking unspecified damages, the losses which it suffered could possibly run into hundreds of millions of dollars.
Prior to FerroChina’s collapse, the funds managed by Mr. Lee were collectively FerroChina’s No. 2 shareholder, holding 14.01 per cent of the company. This stake was worth as much as $240 million in December 2007, when the company’s stock price soared to $2.12.
It is now effectively worth nothing. The stock was suspended from trading last October after FerroChina’s business collapsed because banks refused to roll over the company’s loans of 706 million yuan (S$150 million).
Mr. Lee, who is in his 40s, has admitted to losing $30 million at the age of 35, only to bounce back to become one of the most sought-after fund managers in Singapore until the recent market mayhem.
He told The Straits Times yesterday that he would vigorously defend himself against the lawsuit. ‘At this point, it is not appropriate for us to comment, as it is a matter before the court,’ he said.
Besides FerroChina, his funds had also invested in other Singapore-listed China firms, or S-chips, such as C&O Pharmaceutical Technology and Midsouth Holdings, which was delisted from the Singapore Exchange last year.
CMIA China Fund II alleged in its statement of claim that in July 2007, its board of directors instructed Mr. Lee to sell off a stake it owned in another steel mill in China as soon as possible.
Mr. Lee, however, had already made separate arrangements to swop the stake for 46.5 million FerroChina shares three months earlier. CMIA China Fund II claimed its board was told of the arrangement only on March 31 last year - long after the stake had been converted into FerroChina shares.
‘If the board’s approval had been sought for the FerroChina share exchange, it would not have been granted,’ it said. This was because the share swop included a 12-month ‘lock-up’ period which prevented any sale of the new FerroChina shares until Oct 30 last year - a period which coincided with the collapse of the steel coil-maker.
The fund also alleged that Mr. Lee then compounded the problem by secretly pledging its assets as collateral to support his own borrowings.
In its statement of claim, it is also seeking restitution for its purported failure to list on the London’s Alternative Investment Market because of a conflict of interest which arose from Mr. Lee managing another fund.
‘Mr. Lee and CMIA Capital Partners had never previously disclosed any such conflict of interests...As a consequence, the plaintiff’s ability to seek a listing as agreed in January 2007 had been destroyed or indefinitely delayed,’ it said.
For the 3,800 shareholders of FerroChina, however, the revelations thrown up as a result of the legal tussle between Mr. Lee and CMIA China Fund II might shed light on the circumstances leading to the company’s sudden collapse.
One aggrieved investor, Mr. Kwok, who owns 50,000 FerroChina shares, said: ‘The current state of affairs at FerroChina is very unsatisfactory. Even though we may have to write off our losses, at least let us know what is going on.’
Since its trading suspension, there has been a dearth of information on the firm.
In March, FerroChina said the mainland court administrator, which had been appointed to manage its business, had yet to give it a ‘meaningful update’ on the restructuring plan for its China units.
It was also unable to give an update of its financial status, as the audit conducted by the administrator was not finished.
That same month, chief financial officer Soh Wai Kong resigned to pursue another ‘career opportunity’.
FerroChina could not be contacted for comment on the lawsuit.
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