The forestry firm - involved in the production and sale of fast-growing poplar - announced yesterday that it had until July 9 this year to repay its debt. This replaces an earlier extension to June 9 granted by Liberty Harbor.

It was first announced in May 2007 that Guangzhao Industrial had entered into an agreement for the issue of US$8 million convertible bonds, due 2011, to Liberty Harbor, part of Goldman Sachs Asset Management.

At the time, chief executive Mr Song Xuemeng said the firm was delighted to receive funding support, and that the conversion price of the bonds, which was set at a premium to the last traded price, reflected 'confidence in our business model and in our future'.

But the credit crunch saw the fortunes of the company take a turn for the worse.

In September last year, the collective stakes of its chairman and chief executive fell to around 31.8 per cent as a result of forced-sale of their pledged shares. They had pledged shares for an undisclosed sum of personal loans.

The change in controlling stakeholding constituted a default under the bond agreement with Liberty Harbor, giving it the right to call for redemption.

In the same month, the firm's shares were suspended from trading due to the default.

The firm then received a statutory demand from Liberty Harbor dated Apr 15, 2009 for full repayment of US$8 million, plus interest payments that would have accrued to Oct 10, 2011.

Following the statutory demand, the firm later announced that it had been granted an extension until Tuesday to repay the sum in full.

Guangzhao Industrial's first quarter results ending Mar 31 showed deepening losses of RMB18.9 million, compared to a loss of RMB2.7 million for the same period last year.

Guangzhao Industrial's shares remain suspended on SGX.