SHANGHAI, June 2 (Reuters) - China Huishan Dairy Holdings Co Ltd is facing fresh legal action over money it owes to creditors, underlining the growing pressure the indebted firm is under as it battles to survive major scrutiny of its finances.
The dairy, already facing legal action from creditor Gopher Asset Management, said late on Thursday it was aware of “16 additional legal proceedings”, with a total amount claimed under the new proceedings of 421.8 million yuan ($62 million).
Huishan’s stock has been suspended from trade since March 24, when it plunged 85 percent. Since then most of the firm’s director have quit, it has missed loan payments and lost contact with a key executive in charge of its finances and cash.
The firm has also appointed an adviser to help negotiate with creditors the restructuring of the group’s debt and that of companies owned by Chairman Yang Kai, it said in a statement to the Hong Kong stock exchange.
It added that as of March 31, the company’s unaudited interest-bearing loans totaled around 22.9 billion yuan and contingent liabilities were 3.9 billion yuan.
China’s largest integrated dairy said business operations remained “ordinary”, and said that sales for the year period to end-March had risen 21.6 percent to 5.5 billion yuan.
It added, though, April sales fell 41.3 percent from the same month last year, partly due to “tightening of credit policies of certain major suppliers/creditors” after the suspension of trading in March. This has had an “adverse impact” on cash flow.
Huishan grabbed headlines last year when it sold and leased back part of its herd, but its most recent troubles have laid bare risks of excess leverage and financial engineering in unexpected quarters of corporate China.
$1 = 6.8029 Chinese yuan renminbi Reporting by John Ruwitch and Adam Jourdan; Editing by Christopher Cushing