EC World Reit’s manager responds to SGX queries on going concern issues

SINGAPORE – EC World Reit’s manager said the real estate investment trust (Reit) has adequate current assets to meet its short-term liabilities, in a response to queries from the Singapore Exchange (SGX).

It was commenting on whether the China-focused player with e-commerce, supply chain management and logistics properties would be able to meet its short-term liabilities of about $818.5 million. The bourse regulator noted that ECW Group’s liabilities stood at $1.1 billion but had cash of only $113.3 million, as shown in the group’s condensed interim financial statements.

EC World Asset Management replied on Friday that 64 per cent and 82 per cent of lenders involved in existing onshore and offshore bank loans respectively have obtained internal approvals and are agreeable to a new repayment plan.

The remaining lenders, stated EC World Reit’s manager, are “in the process” of obtaining internal approvals for the new repayment plan.

Also, it noted that the Reit is in the process of completing the proposed divestment of its indirect interests in Bei Gang Logistics and Chongxian Port Logistics at the agreed property values of 1.2 billion yuan (S$235.2 million) and 820 million yuan respectively, with the proceeds adequate to meet the mandatory loan repayment.

The Reit sponsor, it added, has been discussing with financial institutions and investors on securing financing for the purchasers of the proposed divested assets.

The manager also noted that the group will be in a net current asset position of $180.1 million immediately after the completion of the proposed divestment, settlement of existing loans under the new repayment plan and the refinancing of April outstanding loans.

Asked whether the financial statements were correctly prepared on a going concern basis when the group’s and the Reit’s current liabilities exceeded current assets by $228.6 million and $131 million respectively and that the group has $586.3 million due for repayment by December 2023, the manager said the sponsor had placed 200 million yuan in escrow for the sum to be eventually used for partial settlement of mandatory loan repayment.

The sponsor, the manager added, last Friday paid an additional US$1.5 million (S$2 million) to the Reit. The sum is meant for the partial repayment of existing offshore bank loans.

EC World Reit units fell one cent, or 3 per cent, to 32 cents as at 11.41am on Monday, after its manager’s response to SGX was filed. The units closed 1.52 per cent lower at 32 cents at the end of trading.

THE BUSINESS TIMES