Creditors put embattled Orient Power in hands of receivers
Faced with debts of $1.13 billion, electronics firm tries - but fails - to get an extension to its restructuring
Creditors of electronics goods maker Orient Power Holdings have rejected the Hong Kong-listed firm's request for an extension to its restructuring process and put the debt-ridden company under receivership.
About 32 banks and financial institutions, led by HSBC, Standard Chartered, Bank of China and UFJ, are owed $1.13 billion by Orient Power, which two weeks ago announced losses of $1.25 billion for last year, including $903 million in provisions.
The firm is also being sued for US$60 million by Philips for allegedly infringing the Dutch electronics giant's CD and DVD patents.
'On Wednesday night, the banks made the decision to place the company under receivership,' said Roderick Sutton, executive director of restructuring firm Ferrier Hodgson.
The creditors have appointed Mr Sutton and Desmond Chung Seng Chiong, also a Ferrier executive director, as joint receivers.
Orient Power had requested an extension to a standstill agreement to give the company more time to restructure, but the creditors refused, Mr Sutton said.
'The banks became frustrated that Orient Power's restructuring was not proceeding as fast as they hoped. They were surprised and disappointed by the recently announced loss by Orient Power,' a source said
Orient Power's debt problems surfaced in the first half of last year when it was unable to repay some short-term loans. This led to a standstill agreement that has lasted 11 months.
'The banks want a consensual restructuring where all parties are involved,' the source said.
'Our intention is not to wind up the company but have the business continue as a going concern for employees, shareholders and creditors,' Mr Sutton said. 'It is too early to determine the exact financial position of Orient Power. However, the management and receivers are putting all efforts into making the company continue.'
He said he hoped Orient Power's shares could resume trading before the end of this year. They were suspended on April 28 at 18.8 cents per share after falling 6 per cent in just a few minutes of trading following the announcement of the $1.25 billion loss.
The provisions the company reported included $290.12 million for obsolete inventories, $108.6 million for impairment and write-off of properties, plant and equipment, $287.03 million for receivables and $106.46 million for research and development costs.
Turnover fell 11 per cent to $3.7 billion last year. Auditor Ernst & Young qualified Orient Power's results for last year. The auditor said the Philips suit posed significant contingent liabilities, pending a High Court ruling.
Contesting the claims, Orient Power said it had valid defence and had made sufficient provision for the legal expenses.