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SGX wants Sunvic Chemical to keep equity sale proceeds in escrow

The Business Times by TAY PECK GEK

Singapore

SINGAPORE Exchange Regulation (SGX RegCo) has directed Sunvic Chemical to place the 384.6 million yuan (S$77.13 million) proceeds from a proposed equity sale in escrow as it is concerned over the company's unauthorised corporate guarantees which have exposed it to 226 million yuan claims.

SGX RegCo wrote to Sunvic Chemical on Wednesday, saying it has "serious concerns over the questionable circumstances surrounding the unauthorised (and) undisclosed significant corporate guarantees extended to purported third parties".

The regulator is asking the mainboard-listed manufacturer of intermediate chemical products, pending the outcome of the investigations into the loans and circumstances of the purported unauthorised guarantees, to place in an escrow account the incoming proceeds of 384.6 million yuan from the proposed sale of an equity interest in a joint venture.

The escrow account could only be operated jointly by Sunvic Chemical's independent directors who are residents of Singapore.

In addition, the amount cannot be withdrawn before investigations into the two unauthorised corporate guarantees have concluded and with SGX's approval.

If it doesn't comply with these requirements, the company is deemed to have contravened the listing rules.

Sunvic Chemical in January belatedly announced that two subsidiaries had received letters of demand arising from the corporate guarantees they had extended to purportedly unrelated parties in China.

It then requested that trading in its shares be suspended from Jan 14 because the company had concerns that it might not be able to continue as a going concern arising from claims over the corporate guarantees.

According to the company's announcement then, subsidiary Yixing Yinyan Import & Export has furnished a corporate guarantee to Jiangsu Donglai Real Estate Development, a party unrelated to Sunvic. A repayment of 183.7 million yuan is being sought by Yixing City Futao Rural Micro Credit.

Another subsidiary, Jiangsu Jurong Chemical Co, has received a letter of demand in respect of a loan from Bank of China to Jiangsu Dahe Lvjian Chemical, a party unrelated to Sunvic Chemical but to which Jiangsu Jurong has furnished corporate guarantee.

Sunvic Chemical in its response on Jan 18 to SGX RegCo's queries claimed that the corporate guarantees were not authorised nor disclosed.

Trading in Sunvic Chemical shares has been suspended since Jan 14 upon the company's request. The counter was last traded at 2.2 Singapore cents.