Zhonghui Holdings has been placed under judicial management, following a court petition by its creditor United Overseas Bank (UOB). The Singapore High Court has appointed Goh Thien Phong and Chan Kheng Tek, both partners of PricewaterhouseCoopers LLP, as the judicial managers, the China-based waste management company said yesterday.
Zhonghui placed under judicial management
ReplyDeleteBy LYNETTE KHOO
26 September 2009
Zhonghui Holdings has been placed under judicial management, following a court petition by its creditor United Overseas Bank (UOB). The Singapore High Court has appointed Goh Thien Phong and Chan Kheng Tek, both partners of PricewaterhouseCoopers LLP, as the judicial managers, the China-based waste management company said yesterday.
Zhonghui had defaulted on two outstanding loans totalling $19.6 million from UOB and received a letter of demand for repayment from UOB last December.
The court ordered Zhonghui to be placed under judicial management in a hearing last week. UOB was represented by Drew & Napier lawyers Sushil Nair and Chan Wei Meng, while Zhonghui was not represented.
The loans from UOB were used to finance the acquisition of a 42.06 per cent stake in Baoji ZhongCheng Machine Tooling Co in June 2007 for 218.89 million yuan (S$45.5 million).
But Zhonghui’s subsequent plan to repay the loans hinged on a successful divestment of this associate. The process was said to be held back by poor market conditions.
Though the group has been equity-accounting Baoji’s profits, its Baoji stake is represented by a letter of undertaking without an actual transfer of shares.
An advance payment of 50 million yuan for the Baoji stake in 2007 was later found to have been made without board approval, based on a report by special accountant PricewaterhouseCoopers (PwC) in April. The special audit also discovered that another deposit of 40 million yuan for management rights to a waste treatment plant in China was also made by the group without board approval.
Zhonghui had appointed the special accountant after a query from the Singapore Exchange (SGX) in response to issues raised by independent director (ID) Lim Lian Soon when he resigned last October, not long after he joined the board.
The only remaining ID, Lin Song, stepped down in April, citing difficulties in discharging his duties. According to him, the management had not been prompt and responsive to calls to discuss the special audit report and to take steps to rectify the issues identified. The executive directors also rejected his suggestion to transfer Baoji shares immediately to the group. This was soon followed by the resignation of the group’s finance manager, Cui Chengji, in April and company secretary Chew Kok Liang in June.
Zhonghui made a loss of 483,000 yuan for the second quarter ended June 30 and landed in a negative cash position of 4.4 million yuan, after making zero sales and incurring operating expenses.
This compares to a net profit of 12.77 million yuan on the back of 5.7 million yuan sales and 11.22 million yuan from its share of Baoji profits a year ago.