China's Huishan Dairy says missed payments, denies forged invoices

[HONG KONG] China Huishan Dairy Holdings Co Ltd on Tuesday said that it had fallen behind with some loan repayments but denied media reports that its chairman had misappropriated company funds or that the firm had issued forged invoices.

The dairy firm's stock plunged 85 per cent on Friday wiping off about US$4 billion from its market value, hurt by unverified reports about the company's finances. The firm has previously come under attack from US-based short-seller Muddy Waters.

In a Hong Kong exchange filing, Huishan said it had been "late in some bank payments" and that it had asked the regional Liaoning government for support and convened a meeting with 23 creditor banks last week to ask for loans to be rolled over.

It said the Liaoning government had proposed an "action plan" to solve any overdue interest payments within two weeks and to help bolster the group's liquidity within a month.

But it added that it was facing an increasingly challenging environment and given its share price fall, there was "no assurance" as to the continued support of its creditors.

The firm said media reports that Bank of China had conducted an audit of the firm and found a large number of forged invoices and that the firm's controlling shareholder had misappropriated up to three billion yuan were false.

"The Company categorically denies having approved the issue of any forged invoices and does not believe there to be any misappropriation," it said in the statement.

It added Bank of China had assured the firm no such audit had been carried out.

In December, short-seller Muddy Waters questioned Huishan's profits and said it had inflated spending on its cattle farms to artificially raise capital expenditure figures - an attack that also led to a trading suspension.

The company also said it had not been able to reach one of its executive directors in charge of the firm's finances and cash since March 21, when she indicated work stress and said she would take a leave of absence.

The company's shares, halted since March 24, will continue to suspended until the board can get more clarity on the firm's financial position.

REUTERS