SILVER Eagle Holdings, which makes sports shoes, has published further details of its financial woes. Its annual report gave details of litigation and liquidation which led chairman Tse Hei to call it an 'undoubtedly difficult year'. The company has come devised a rescue package which will see transfer of control being put to shareholders. Grande Holdings has made a HK$148.2 million bid for the group and, if the terms are approved, would wind up with a 61.3 per cent stake in Silver Eagle. The key worry was shown at its US subsidiary Zubaz, in which Silver Eagle held a 90 per cent equity stake. Zubaz incurred losses of about HK$51.6 million in the year to the end of December 1993 and required additional financing. But Silver Eagle declined to provide the cash and in February this year reached an agreement with a firm called 20/20 Sports - which will require 20/20 to put US$2.5 million into Zubaz in convertible loans. Conversion of the loan into equity in two years time would see Silver Eagle's stake diluted to 45 per cent. It had already given up control of Zubaz. As a result, Silver Eagle was to make write-offs of HK$43.1 million. That provision is on top of provisions of HK$9.9 million at RAE Holdings, another US sports trading firm. Silver Eagle wrote off investment in RAE after deciding that RAE was soley dependent on Silver Eagle for financial support. A larger provision was made for the liquidation of Global Sports, in which Silver Eagle held 68.1 per cent equity. Write offs at Global were HK$23.2 million. The group also made a HK$166.92 million provision at another troubled US subsidiary, Riddell Athletic Footwear. The group's major US customer, RAF became embroiled in a lengthy legal action with its licensor, RHC Licensing Corp, according to the annual report. The dispute was finally settled in February this year. Silver Eagle was owed US$25.9 million in accounts receivable in Riddell, while the RAF account showed a deficit of US$22.6 million. A rescue package involving a US$4.4 million loan from Heller Finance was agreed on, but Heller would have first lien on Ridell assets. With Riddell's profits forecast to be between US$1.4 million and US$2.9 million, the company decided it would be prudent to make provisions for total exposure.
