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China Huishan Dairy Holdings Co Ltd sinks deeper into crisis
June 5, 2017

China Huishan Dairy Holdings Co Ltd sunk deeper into crisis on Monday, saying it will miss a June deadline for publishing its full-year results as it faces “tremendous difficulties” getting a clear picture of its finances.

Huishan, which has $3.9 billion in debt, also said it would hire a forensic accountant to investigate the gaps in its financial statements, and continue to work with advisors and creditors to negotiate a possible debt restructuring plan.

The firm’s woes came to light when its stock plunged 85 percent on March 24 before being suspended. Since then most of its directors have quit, it has missed loan payments and lost contact with a key executive in charge of its finances and cash.

The murky picture of Huishan’s finances underscores growing concern amongst lenders and regulators about the risks of excess leverage and financial engineering in corporate China.

Failure to file its results on time could also put the company at risk of being delisted.

Huishan, which grabbed headlines last year when it sold and leased back part of its herd, said details on its cash position, receivables, payables and borrowings were particularly unclear.

“The company will not be in a position to publish the audited results of the Group for the year ended 31 March 2017 on or before 30 June 2017,” it said in a filing.

Just last week Huishan, which has billed itself as the country’s largest integrated dairy firm, said was facing legal action in more than a dozen court proceedings over money owed to creditors.

Huishan, which counts Bank of China Ltd and HSBC among its creditors, said its total debt pile totalled 26.73 billion yuan ($3.9 billion) as of March 31, though it said it could not guarantee the figures were complete and accurate.

The firm said it believed it had also guaranteed a further 3.94 billion yuan of liabilities for third party entities and was in the process of verifying this.

It added its assets were 26.22 billion yuan as of end-March, with 467 million yuan in cash or cash equivalents. There was, however, a “significant discrepancy” with a cash position of 2.9 billion yuan in “incomplete management accounts”, it said.

Huishan’s board was left paralysed in April after a spate of resignations left it with just two executive directors, including embattled Chairman Yang Kai and finance director Ge Kun. Ge has now been missing for over two months.

Huishan said last week business operations remained “ordinary”. Sales for the year to end-March rose 21.6 percent to 5.5 billion yuan, though April monthly sales fell 41.3 percent due to tighter credit conditions. ($1 = 6.8041 Chinese yuan). – Reuters


Source: The Star online


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