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Cordlife sinks into the red on fair value loss
CORDLIFE Group - which runs a cord-blood bank - on Friday reversed into the red for its fiscal second quarter, dragged by fair value losses.
Net loss for the three months ended Dec 31, 2014, stood at S$3.03 million, compared to a net profit of S$4.24 million a year ago.
It posted a fair value loss on derivatives of S$4.68 million, compared to none a year ago. This stems from an acquisition by Cordlife and Magnum Opus International Holding of a 7 per cent senior convertible note due Oct 3, 2017, which was issued by China Cord Blood Corporation (CCBC) in the principal amount of US$50 million.
The debt purchase effectively raised Cordlife's stake in CCBC to about 18 per cent from 10 per cent, a press statement in August last year said. Under a separate agreement, Cordlife will also lend Magnum up to US$46.5 million.
"As the convertible bond provides the company the option to convert to shares in CCBC, the company is required to separately compute the fair value changes on the conversion option component and recognise these changes in profit or loss," Cordlife said in its financial statement.
"Fair value changes on the conversion option are mainly affected by the time to maturity of the bond, the share price of CCBC as at the reporting date compared to the date of acquisition and the value of the bond as a function of the cash inflow from the bond at the redemption date."
The net loss was despite a 12.5 per cent rise in gross profit to S$9.4 million, reflecting an increase in new client deliveries.