Moulin's key asset a cause of worry for creditors
The United States subsidiary and most valuable asset of bankrupt Moulin Global Eyecare Holdings could be in trouble. In a development that will hound Moulin's creditors, Eye Care Centers of America yesterday revealed its own financial health was precarious.
Eye Care, the third-largest eyewear retailer in the US, revealed in a bond prospectus that any sale of Moulin's stake would oblige it to immediately repay JP Morgan Chase Bank US$165 million in senior debt and an additional US$152 million in outstanding bonds.
On July 2, Eye Care had US$21.4 million cash and long-term debt of US$316.8 million, its highest gearing in four years.
'We could be forced into bankruptcy or liquidation, which could result in you losing your investment in the notes,' the firm warned investors, from whom it was hoping to raise a further US$152 million through 10-year notes.
According to an insider, Moulin's creditors are keen to sell the company's 56 per cent stake in Eye Care as soon as possible. More than 20 creditor banks, led by HSBC, are chasing Moulin for more than $2 billion in unpaid debt.
US venture capital firm Golden Gate Capital, which owns 43 per cent of Eye Care, opposes any change in the status quo.
Golden Gate's bargaining position is strengthened by Moulin's obligation to buy back the venture capital firm's shares in Eye Care at a premium by February 2009. Any party acquiring Moulin's shares in Eye Care will have to honour that agreement.
'From whichever angle you look at it, Golden Gate is the only winner while the lenders including HSBC, Hang Seng Bank and Standard Chartered are the losers,' the source said. 'It would not be easy to persuade somebody to buy Eye Care when Moulin is being liquidated.'
In return for the US$190 million credit facility, Eye Care pledged a significant portion of its assets as collateral to JP Morgan, leaving little for other creditors to go after.
'Moulin's creditor banks do not want Eye Care to default, otherwise their rights to its assets will be subordinate to [JP Morgan],' said Ivan Chung, a managing director at Xinhua Far East China Ratings.
JP Morgan can also call in its loan if Eye Care fails to meet stringent financial targets.
Eye Care posted a net loss of US$2 million for the first half to July 2, its first in more than three years. It blamed the loss on higher interest expenses arising from its increased debt burden. Long-term debt rose to US$316.8 million from US$223.9 million in the period.
Meanwhile, it is understood that machinery at Moulin's factory in Chaoyang, Guangdong province, was sold last week for four million yuan at an auction organised by its mainland creditors. The buyer was Ma Hubei, a relative of Moulin chairman Ma Bo-kee.
