Guangzhao Ind Forest: Co has received a statutory demand by Madison Pacific Trust claiming for full repayment for outstanding principal of US$3.4m plus default interest of $248.7k due by 30 Sep 2011. The notes were owed to Liberty Harbor which has requested co to transfer the notes to Madison Pacific Trust. Co is currently in talks with Madison Pacific to resolve the issue.
Co has conducted a recent private placement to raise net proceeds of $960k to finance the notes.
This issue highlights problems with co’s possible liquidity and solvency issues. As of last results, co had total assets of Rmb713.3m of which 642.6m were biological assets or their inventory and a net profit of Rmb2.8m was due to revaluation gains of Rmb29.1m, all possible issues with cash generation. Auditors have expressed concerns in their last qualified opinion on whether current biological assets were convertible to cash and a BT article was also written on the risk of co’s going concern.
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