China Elegance International Fashion has revealed that declining demand and the credit crunch have forced it to make provisions leading to an unaudited operating loss of about $172.8 million for the year to March 31. The company published the figure and other information based on unaudited management accounts in a rights issue prospectus. Under the proposal, the company would issue between 392.7 million and 457.8 million shares to raise an estimated $10 million. Directors said that after reviewing the extent to which outstanding accounts receivable could be recovered and realisable value of stock, general provisions amounting to $67.9 million were necessary. They said the company had incurred additional unspecified start-up and advertising costs in developing a non-leather garment sales and distribution business during the year. As a result of the rights issue, the company said the subscription price for new warrants had been adjusted down to $1.31 a share from $1.46.