Retailer Benefun International Holdings said it might report a loss for the year to June 30, largely because of provisions stemming from its distribution activities for fashion-label Benetton. Executive director Lawrence Lo King-fat said the company would make a string of provisions, among them one for less than $10 million for the $25 million sale of Benefashion Taiwan in June. The company had $65.35 million net profit last year, but in its first half ended on December 31, earnings tumbled almost 84 per cent to $3 million. Benefashion Taiwan retails middle-market Benetton women's and men's wear in Taiwan. Benefun, which went public only 14 months ago, has been caught in the retail slump in Hong Kong and is putting its retailing arm in the SAR - Benefashion - up for sale. 'We are forced to chop off the arm which [sustained losses of] tens of millions of dollars during the past year,' he said. The ultimate reasons for the sale were because no banks were willing to issue letters of credit for the group to purchase Benetton apparel and the group was pessimistic about the Hong Kong retail sector, Mr Lo said. The sale was likely to be finalised within the next fortnight to a Macau-based company that had intensive exposure to garment exports, he said. The 16-strong retail chain was at present valued at $20 million, he said. As bank creditors did not support Hong Kong retailers such as Benefun, the group had put on hold indefinitely the opening of two Benetton mega-stores in Hong Kong, he said. 'Banks are scared if you mention the word retail,' Mr Lo said. In spite of the warning on losses, the group maintained a healthy financial position, he said. Total debt was reduced to $30 million after the group used $20 million on it from the sale of its Taiwan operations, he said. Also, $10 million raised from a convertible note was used to pay off debt, he said.