Liquidators appointed at Norstar amid slump, soured forex trades
Norstar Founders Group, one of the world's largest car component manufacturers, was forced to liquidate amid the downturn in demand for cars and the company's exposure to foreign exchange forward contracts.
Deloitte Touche Tohmatsu was appointed by the High Court of Hong Kong as provisional liquidator of the company yesterday, Deloitte said in a statement.
The Beijing-based company, which supplies car parts to major carmakers such as state-backed Beijing Automotive Industry Corp, employs 2,300 staff.
The Hong Kong-listed car component maker focused on the overseas market, including the United States and Europe. The global economic downturn had seriously reduced the revenue and profit of the firm, said car component veterans in Beijing.
The company entered into five non-deliverable foreign exchange forward contracts, or so-called accumulators, with several banks beginning last July, it said on January 16. Three days later trading was suspended in the company's shares.
The company said it 'adversely suffered' from the accumulators as a result of the volatility of the foreign exchange market in the fourth quarter.
The company also disclosed that it had been sued by Shanghai Industrial Investment to recover an advance payment of 326.6 million yuan (HK$370.53 million). The High Court of Shanghai has granted a freeze order against the bank accounts and related assets of the company at the request of Shanghai Industrial Investment.
Norstar's financial controller and executive director Zhang Zhenjuan resigned in December.
Analysts and industry veterans said in addition to the worsening of overseas markets, Norstar also had difficulty working with Beijing Automotive in its car component platform.
'There was one batch of products which Norstar was selling to Beijing Automotive before, but that supply seemed to have stopped later on,' said Zhang Xin, an industry analyst at Guotai Junan.
For the six months ended September, the company reported a 200.14 million yuan net profit, down 10 per cent from a year earlier. The company said it had net cash at that time of 2.67 billion yuan.
