Hong Leong Asia to book $43.5m loss from stake transfer

Industrial conglomerate Hong Leong Asia expects to recognise a $43.5 million loss from the deconsolidation of its consumer products unit following a court-sanctioned restructuring plan, the company announced yesterday.

Hong Leong Asia, the trade and industry arm of Hong Leong Group, said the Xinfei companies, which form its consumer products arm, are no longer a subsidiary of the group after the Xinxiang Intermediate People's Court approved a restructuring plan by administrators King & Wood Mallesons (Beijing) that took the responsibility for restructuring Xinfei out of Hong Leong Asia's hands.

Under the approved restructuring plan, Hong Leong Asia will transfer its equity stake in Xinfei to new investors at zero consideration. The new Xinfei investors will be selected through a judicial auction, although creditors will get first dibs on proceeds from any successful bid.

The minimum bid price for the first round of bidding, which will close on June 29, is 450 million yuan (S$93.2 million). A subsequent auction, if required, will see the minimum price lowered to 400 million yuan.

Creditors are estimated to have a recovery rate between 1.51 per cent and 9.82 per cent, Hong Leong Asia said. It is assuming zero recovery for itself because of the difficulty in assessing the final recovery rate.

The firm will derecognise all assets and liabilities of the Xinfei companies. Any recovery in the future will be treated as income.

A version of this article appeared in the print edition of The Straits Times on June 27, 2018, with the headline 'Hong Leong Asia to book $43.5m loss from stake transfer'. Subscribe