China Shanshui Cement has acknowledged that legal action against one of its major shareholders has had negative consequences, including the suspension of financing from some financial institutions. China Shanshui Investment, which owns about a quarter of the cement company, has been taken into receivership following a High Court decision, which is awaiting final determination. China Shanshui Cement reports that the decision has caused a number of undesirable consequences, as follows:
1. Borrowings from financial institutions: Some financial institutions have suspended the use by the Group of the outstanding unutilized amount of certain existing bank borrowings and the new bank borrowings applications from the Group, due to their concerns on the potential impact from the Decision on the Group.
2. Relationship with suppliers and contractors: Prior to the Decision, the suppliers and contractors of the Group have always been agreeable to offer the Group a credit period of approximately two to three months due to their long term business relationships. Since the Decision, some suppliers and contractors have demanded prompt payments and intended to review the customary credit period to the Group.
3. Joint ventures: The Group has established some joint ventures with certain joint venture partners (“JV Partners”) in conducting the cement business in areas where the Group is situated. Pursuant to the relevant joint venture agreements, the JV Partners are responsible for assisting in obtaining the requisite licenses for conducting the cement business in those areas. It has been brought to the attention of the Board that certain JV Partners have expressed their intention to review the joint venture relationship with the Group as a result of the Decision.
Adapted from press release by Katherine Guenioui
Read the article online at: https://www.worldcement.com/asia-pacific-rim/10062015/china-shanshui-cement-admits-difficulties-982/