Sincap defers repayment deadline for at least US$6m owed by firm of CEO's brother

CATALIST-listed Sincap Group has extended the repayment deadline for at least US$6 million due from Artwell, a company solely owned by the brother of Sincap's chief executive, to April next year.

In a Friday bourse filing, Sincap said that repayment from Artwell, which buys coal from the company, from September onwards will be deferred. Artwell will repay US$6 million by April 28, 2021 instead. Artwell's sole director and shareholder is Chu Min Fang, the brother of Sincap's executive chairman and CEO, Chu Ming Kin.

After repaying the US$6 million, Artwell will continue to pay at least US$1 million per month on the 28th of each month. An interest of 7.5 per cent per annum will continue to accrue on all outstanding amounts.

Sincap's announcement comes after the bourse queried the company in April about its ability to remain a going concern. In its annual report for FY2019 ended December, Sincap had 252.1 million yuan (S$51.4 million) in current trade receivables, of which 225.3 million yuan were due from a related party.

In assessing that the company remains a going concern, Sincap in the Friday filing said that repayment from Artwell has been prompt in the past, that Mr Chu Ming Kin has a "good relationship" with the company and that he has personally flown to meet his brother to discuss the repayment schedule.

Artwell had asked Sincap for a deferment of six months till April 2021, as it has faced disruptions in its operations caused by the pandemic. Chinese coal output fell "drastically" as workers could not return to power plants.

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Separately, a group of shareholders have provided letters of undertaking to Sincap to provide continuous financial support for the company is able to meet its obligations. These shareholders are Mr Chu Ming Kin, Chen Jianming, Huang Qingquan, Sze Wai Bun Raymond, Wang Xiaoling and Zhu Shiyan.

Mr Chu has extended S$121,887 to the company in the form of an interest-free loan and has provided a verbal confirmation to the company and the board that he will provide a further S$200,000 as interest-free loans to the company by Dec 15, 2020.

"The board has considered and have determined that the group will be able to continue operating as a going concern, on the basis that with Mr Chu Ming Kin's investment of S$321,887, the group will be able to meet its debt obligations for the next 12 months," Sincap said in its filing.

Trading in shares of Sincap has been halted since Dec 2.