Shares of Guangnan (Holdings) surged yesterday following the debt-ridden company's announcement of a return to profitability. Thanks to a HK$1.4 billion gain generated from a debt-restructuring plan, the supermarket operator and food distributor reported net profit of HK$866.05 million in the year to December 31. A year earlier, Guangnan incurred a HK$194.21 million loss. The counter closed yesterday at 14.4 HK cents, up 42.57 per cent. It reached 16 HK cents during the day. Trading was heavy, with HK$39.58 million worth of shares changing hands. Guangnan generated a HK$1.44 billion non-operating income, largely from a net gain through the discharging and waiving of its indebtedness and net liabilities. Loss from operations narrowed 35 per cent to HK$77.6 million, compared to a HK$119.52 million net loss a year ago. Earnings per share were 95 HK cents, compared to 21 HK cents loss per share in 1999. Guangnan's restructuring, which was completed in December, was part of the US$5.95 billion debt restructuring plan of Guangdong Enterprises, the flagship of the Guangdong municipal government, which was launched in December 1998. Guangnan became insolvent in 1997 due to fraud by former management. The company incurred about US$488 million in debts and reported a negative shareholders' equity of HK$1.18 billion as of December 31, 1998. Guangnan was the latest listed company to post a huge gain from debt-restructuring. On Sunday, financially troubled property company Chi Cheung Investment - which property investor Chinese Estates Holdings acquired in November through a HK$276 million debt-restructuring plan - also returned to profit due to a special gain from the restructuring. Chi Cheung said the debt-restructuring plan allowed it to eliminate about HK$819.7 million in outstanding debts, of which about 82.5 per cent, or HK$676.7 million, was converted into equity based on the proportion of indebtedness to each creditor. Chi Cheung booked a gain of HK$542.01 million, helping it to a profit of HK$591.83 million for the year to December 31, against a HK$257.8 million loss in 1999.
