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Jane Moir

The companies judge has taken the drastic step of ordering the immediate liquidation of Akai Holdings amid debts of US$856 million and creditors' accusations of 'serious misconduct' and missing assets.

A proposed restructuring involving white knight Toyo Holdings was thrown out after failing to get a basic consensus from creditors despite four months of negotiations.

Provisional liquidators have moved in to carve up the consumer electronics company and its manufacturing and distribution arm, Kong Wah Holdings.

It is one of a handful of listed companies deemed unsalvageable by the courts in the wake of the 1997 financial crisis, with judges preferring to exhaust restructuring possibilities.

However, Akai's debts are undisputed. It also recently posted Hong Kong's largest corporate loss, haemorrhaging to the tune of US$1.72 billion in the year to January 31.

The company cited 11 extraordinary loss items which included a US$436.9 million provision for litigation.

A banking syndicate, involving Den Danske Bank Aktieselskab, Bank of Scotland and Emirates Bank International, filed petitions to wind up Akai in January.

Efforts to restructure the group initially failed to appease creditors.

A revised proposal - which the company claimed was proceeding in a 'positive fashion' - was too vague and too late, Mrs Justice Doreen Le Pichon ruled.

'At least four months have come and gone without any consensus being reached as to its basic terms,' she said in a written judgment.

The judge later added: 'That negotiations were proceeding in a 'positive' fashion could mean any number of things. The word used was too elastic and imprecise.'

Although an initial recovery rate for bank creditors ranged from 4 per cent to 100 per cent under the plan, 'no one saw fit to approach the question from the perspective of unsecured indebtedness', the judge said.

The petitioning banks had also been critical of Akai's failure to 'address in any meaningful way the numerous areas of concern', the judge noted.

These included the lack of explanation for the huge operational loss of US$1.82 billion reported by the group for the year to January 31.

Akai and Kong Wah were also accused by the banks of failing to give information on their financial position for the period from February to July this year.

The companies were also slated by the creditors for failing to give details relating to the 'loss' of assets since the presentation of the winding-up petitions.

'Implicit in all of this were allegations of serious misconduct on the part of the companies and/or Toyo and/or those who control them,' the judge said.

Mrs Justice Le Pichon declined to express any views or further probe the claims.

Evidence filed by the companies did not address the allegations substantively, she said, which may have been due to time constraints. However, the banks did file several affidavits into evidence relating to the allegations.

The judge was highly critical of Akai and Kong Wah's 'surreptitious manner' in suddenly producing letters to show it had additional support from creditors in order to win time to pursue the restructuring.

However, support from creditors holding 66.5 per cent of the scheme debt was not enough to justify an adjournment.

Things may have been different had there been support from 66.5 per cent of the scheme creditors, Mrs Justice Le Pichon said.



Akai liquidation ordered amid 'serious misconduct'