| HONG KONG, March 25
HONG KONG, March 25 China's Labixiaoxin Snacks
Group Ltd will hold a call on Wednesday in a bid to
reassure lenders after the company's shares were suspended on
the Hong Kong exchange on Monday after the company postponed its
Labixiaoxin, the second-largest manufacturer of jelly
products in China, runs the risk of breaking a covenant on an
existing $75 million loan if the shares are suspended for more
than 15 days, lenders said.
The company had already held two lender calls in response to
press reports before its shares were suspended on Monday.
Labixiaoxin's problems highlight the growing risks of
lending to Chinese midcap privately-owned companies. More
Chinese privately-owned companies have been raising offshore
loans, despite recent defaults on bonds and local renminbi debt.
In 2013, privately owned firms in China raised $27.6 billion
from offshore loans, far outstripping the combined $21 billion
figure in the previous four years, according to LPC data.
"We will definitely be more selective on lending to small-
to medium-sized Chinese private companies in the future," said
Labixiaoxin's Chief Financial Officer Sam Yap will update
investors on Wednesday's call, sources said. Lenders are anxious
to know when the company's annual results will be released.
Labixiaoxin has yet to announce a release date for its 2013
full-year financial results. The company's financial statements
have been audited by PricewaterhouseCoopers since 2003.
"It is good in a way that now the auditor will have to check
very carefully before releasing the annual results of the
company," one of the lenders said.
Some lenders said that on the positive side, the company's
leverage is low and it was in a net cash position as at June
Labixiaoxin's first lender call on March 13 addressed a
press report that the company may have overstated its sales and
that its margins were higher than its peers.
The company denied the report and said that it might
increase its dividend payment, which pays at least 20 percent of
net profit every year, to regain investors' confidence.
A second call on March 17 dealt with another media report
alleging that one of Labixiaoxin's suppliers is producing toxic
gelatine which is used in gummy candy products.
Labixiaoxin's existing $75 million, three-year amortising
debut loan was signed in January 2013 and was arranged by
Deutsche Bank, China Development Industrial Bank, Citic Bank
International and Taishin International Bank.
(Editing by Tessa Walsh)