Financially troubled Nanjing Panda Electronics has recovered 500 million yuan of debt by acquiring 25 per cent of loss-making television tube maker Hua Fei Group. Nanjing Panda, which is listed in Shanghai and Hong Kong, was owed 500 million yuan plus interest by a scandal-hit former subsidiary, Nanjing Panda Mobile Communication Equipment. Last year, a mainland court forced Nanjing Panda to sell its 51 per cent stake in Panda Mobile to repay its debt. Panda Mobile's former general manager, Ma Ziping, was detained in China in July last year on suspicion of economic crimes including embezzlement and falsifying financial statements. On May 8, the government of Jiangsu, home province of Nanjing Panda, agreed to assume and repay the 500 million yuan debt plus interest to Nanjing Panda in the form of a 25 per cent stake in Hua Fei. The Jiangsu government, which owns a minority stake in Nanjing Panda, will execute this transaction through Jiangsu International Trust and Investment. Nanjing Panda will acquire the 25 per cent stake in Hua Fei for 522.5 million yuan, the equivalent of Panda Mobile's debt plus interest owed. 'Panda Mobile was in financial difficulties and would be unlikely to repay the debt,' Nanjing Panda said. Hua Fei has a net asset value of 2.09 billion yuan and is 55 per cent owned by LG Philips Displays (China). 'The acquisition may turn out to be bad for Nanjing Panda shareholders if Hua Fei keeps making losses,' said an investment banker. Hua Fei posted a net loss of 948.7 million yuan last year against net profit of 256.9 million yuan in 2004, based on Hong Kong accounting standards. Turnover fell 13.5 per cent to 3.65 billion yuan. 'Nanjing Panda has an awful track record in operating businesses,' said the banker. Nanjing Panda's profits came mainly from its 43 per cent joint venture with Sony Ericsson, he said. 'The amazing thing about Nanjing Panda is it made no profits from its television and hand-phone businesses. Nanjing Panda would have made more profits if it had not operated any businesses and was merely a holding company with its joint venture with Sony Ericsson,' said the banker. Nanjing Panda's turnover rose 28 per cent to 850.8 million yuan last year, while net profit surged 41 per cent to 92.76 million yuan, based on Hong Kong accounting standards. Its results last year were qualified by its auditor Horwath Hong Kong CPA.