TCL Corp, the Shenzhen-listed parent of troubled TCL Multimedia Technology Holdings, is to raise up to 1.05 billion yuan through a private share placement to institutional investors, the company said. Up to 650 million yuan of the funds raised will be invested in Hong Kong-listed TCL Multimedia, one of the world's top three television makers, according to a statement by the parent company to the Shenzhen Stock Exchange. TCL Multimedia, which has defaulted on bank loans worth HK$1.13 billion, is restructuring its loss-making European operations in a move that 'will involve a huge amount of restructuring expenses due to union-related issues', a recent Citic Securities Hong Kong report said. 'Further funding from bank borrowings looks difficult for TCL Multimedia, leaving equity financing as the only option.' TCL Multimedia is exploring funding options to improve its financial position, Li Dongsheng, chairman of TCL Multimedia and TCL Corp, said on October 20. The loan agreements 'would entitle the banks to declare all outstanding loans immediately due', Mr Li said. 'If the banks are to take action, there would be fundamental uncertainty as to the company's ability to continue as a going concern.'' The default arose from the company's 'unsatisfactory' financial performance in the first nine months of this year, he said. During that period, TCL Multimedia's net loss widened to HK$1.52 billion from HK$274.7 million in the same period last year while turnover fell 4.6 per cent to HK$21.38 million. TCL Corp warned on October 21 it would incur a loss for the whole year, despite turning to a third-quarter net profit of 31 million yuan from a 446.4 million yuan net loss a year earlier. 'TCL's business is capital-intensive,' said Ivan Chung, a ratings managing director at Xinhua Finance. 'Since it is losing money, it has to recapitalise.' TCL will issue A shares to a maximum of 10 institutional investors, which may include brokerages and fund management companies. The placement shares will be priced at no less than 90 per cent of the average closing price of the 20 days before Thursday. The share placement will take place within a year of obtaining approval at a yet to be scheduled annual general meeting, the statement said yesterday. TCL's A shares fell 2.5 per cent to close at 2.31 yuan on Thursday.
