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Jane Moir

Golden Harvest boss Raymond Chow Ting-hsing has been accused of flouting a $101 million loan deal with Chase Manhattan Bank after the entertainment company sold its film library and rights to Warner Brothers for US$25 million.

 The bank is suing for damages.

 It has also filed wind-up petitions against the controlling company of the Golden Harvest Group, WFC Holdings and Panasia Films Production.

 Mr Chow agreed to grant a debenture to the bank over all undertakings, properties and assets of Golden Harvest Pictures as security on the $101 million credit facility extended to Panasia, according to a High Court writ.

 However, he failed to do so and instead proceeded to induce Golden Harvest Pictures to sell its library of 170 films - including all physical and intellectual property rights - to pay off other debtors, it is alleged.

 Panasia now has insufficient funds to repay the bank.

 As of Wednesday, the sum of $93.93 million plus interest of $6 million was outstanding, the writ states.

 Moreover, the Golden Harvest Group as a whole is insolvent, the bank claims.

 According to a financial review report by Ernst & Young dated February 25 this year, the insolvency is 'both from the balance sheet and cash flow perspectives'.

 Chase Manhattan claims it suffered loss and damage as a result of Mr Chow's acts.

 The $101 million loan was extended to Panasia in May last year with the express term that $99 million would be used to repay outstanding debts to the bank owed by other companies within the group.

 Mr Chow - director and controlling shareholder of WFC Holdings - signed the credit agreement on May 11 on behalf of Golden Harvest Pictures, and in his personal capacity, the bank claims.

 This meant he agreed and undertook to grant the debenture.

 It was moreover an implied term of the contract that Golden Harvest Pictures would not sell or dispose of its undertakings, properties and assets, the writ states.

 Such a sale would deplete or substantially reduce the value of the security - in the form of the debenture - to be granted to the bank.

 The principal property and assets was the library of 170 films.

 By July that year, not only had Mr Chow failed to grant the debenture, but he negotiated the sale of the film library to Warner Brothers, the writ says.

 Chase Manhattan was informed of the deal in August.

 The money from Warner Brothers moreover was not paid to or retained by Golden Harvest Pictures 'but instead was applied by the defendant [Mr Chow] to reduce the indebtedness of other companies within the Golden Harvest Group to various lenders', the writ says.

 Chase Manhattan claims that if the films had not been sold, it could have had the debenture which would have been ample funds to discharge debts owed by Panasia.

 The bank says it will rely on the sale price of US$25 million accrued from Warner Brothers as the sum it could reasonably have expected to realise from enforcing the debenture.

 Chase Manhattan had provided credit facilities to the group for 28 years, according to the writ.



Golden Harvest chief in $101m row