Troubled China Sky eyes revamp via reverse takeover

China Sky Chemical Fibre Co Ltd is looking to restructure via a reverse takeover even as it continues to grapple with outstanding financial and legal troubles.

It listed a diverse range of projects that may potentially be injected into the group, including rural urbanisation projects in Beijing Huairou District, retirement living, health pension as well as tourism comprehensive development projects.

The Fujian-based nylon fibre maker said in a filing on Monday that it is also looking at Fujian eco-agricultural tourism industry chain comprehensive development, food processing, "Tang Baoxiang" and other brands of vegetarian food franchise, breakfast vans to be operated by military families, and "sociality and consumer data operation projects".

The beleaguered group had in October last year filed a lawsuit in Singapore's High Court against former non-executive director Zheng Kai Su for what it claimed was "fraudulent and/or unauthorised use of the group's funds and the fraudulent and/or unauthorised use of the group's assets as collateral for securing loans".

It had since filed an application to serve the lawsuit documents on Mr Zheng in China on March 13 this year and has been requesting for updates from the Court on the status of the service of the documents. As of Sept 19, however, the group had been informed that the Ministry of Foreign Affairs Beijing Mission had no updates on the status of the service of the documents.

Meanwhile, its Chinese subsidiary Qingdao Zhongda Chemical Fibre Company Ltd is facing several lawsuits filed against it, including a guarantee by Zhongda for a "fraudulent loan" of 790 million yuan (S$162.5 million) taken by the group's indirect subsidiary, Quanzhou Tianyu Chemical Fiber & Weaving Industry Co Ltd (Tianyu), whose legal representative is Mr Zheng.

Zhongda is also sued by a dozen suppliers for various amounts of unpaid outstanding balances, and for a loan of 10 million yuan with "high interest". Separately, it faces a petition filed by Qingdao Huangdao District Industrial & Commercial Bank for a loan of about 120 million yuan that was granted last year, of which 50 million yuan was due. The hearing for the petition has been fixed on Tuesday.

"The group's legal advisers and accounting firms are currently dealing with the lawsuits with the main objective of protecting the group's interest," China Sky said.

The group had in April successfully changed the legal representative for Zhongda from Yu Guang to group chairman He Zhidong. It said on Monday that it is now awaiting the Chinese authority's approval for the change of legal representative for Zhongda from Mr He to his brother He Zhiping. But due to the many unresolved issues surrounding Tianyu and another group subsidiary Tianjian Special Polymede Fibre Technology Fujian Co Ltd (Tianjian), the group said "it is impossible to find anyone willing to take up this position" of a legal representative for them.

Shares of China Sky had been suspended from trading since August 2016. It had a four-year trading suspension from 2011 to 2015 stemming from a scandal centred on its former chief executive Huang Zhong Xuan, who admitted to making misleading statements on the firm's planned land acquisition in Fujian and later settled the issue with the Monetary Authority of Singapore with a civil penalty of S$2.5 million.

Lynette Khoo
10 October 2017

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