A key investment vehicle of southern China's Zhuhai municipal government is on the verge of collapse after banks rejected an offer to restructure HK$4.49 billion (US$576 million) in debts, a report said Saturday.
Zhu Kwan Group, owned and controlled by the Zhuhai government, has reported liabilities of at least HK$6.34 billion, of which HK$4.49 billion is owed to 28 banks based mainly in Hong Kong, the South China Morning Post reported.
A dispute with creditors has placed its ability to raise finances in doubt. The banks have rejected an "insulting" offer to restructure its huge debts and have threatened to liquidate the firm, said the report.
Zhu Kwan boasts substantial interests in Zhuhai, one of China's five special economic zones, with 37 companies in China and 13 in Hong Kong and Macau including hotels, highways, bridges and tourism.
However, owing to its cash flow problems, many of the projects have been halted.
According to the Post, the firm does not have any business that generates major cash flow so it is unable to repay the outstanding loans.
Banks have refused to buy out the troubled company as this would only yield a return of some 18 percent on the loans and are also concerned that 41.23 million dollars appears to have gone msising, said the report.
In addition, the firms' liabilities have risen by HK$20 million due to "discrepancies in accounting standards."
"We think its disgraceful and insulting. Where did the money go?" a source close to the creditors told the Post.
Creditors are demanding full disclosure of assets and liabilities not included in management accounts.
Zhu Kwan first defaulted on its loan payments in 1998. In January the Zhuhai government put an offer for 2.2 billion yuan on the table.