Taipei District Court court yesterday approved insolvency protection requests from two companies forming part of the Rebar Asia Pacific Group (力霸亞太企業集團).
Chia Hsin Food & Synthetic Fiber Co (嘉新食品化纖) and China Rebar Co (中國力霸) yesterday said they had filed for corporate restructuring and insolvency protection last Friday, prompting a knee-jerk reaction from investors to dump shares of other members of the business group.
With the protection, Chia Hsin need not pay its debts for 90 days. and creditors cannot make claims against the company during this period.
Shares of Chia Hsin and China Rebar tumbled by the 7 percent daily limit to NT$3.83 and NT$4.52, respectively.
Chia Hsin said in a filing to the Taiwan Stock Exchange Corp that the company registered a loss of NT$11.47 billion (US$215.1 million) between 2000 and the third quarter of last year. Over the seven-year period, it also paid bank loans and interest totaling NT$11.5 billion, it said.
Years of red ink and expenditure on loans and interest left Chia Hsin with declining cash flow and hiking debt ratio, the company said. Chia Hsin's finances hit rock bottom after banks tightened its credit, and its liabilities had reached NT$19.9 billion as of the end of September, it added.
China Rebar, which runs textile, construction, department store and hotel businesses, has experienced a similar predicament.
The firm said in a separate filing to the Taiwan Stock Exchange that it had accumulated losses of NT$13.84 billion from 2000 to the third quarter of last year.
After paying bank loans and interest totalling NT$10.57 billion over this period, the company still had liabilities of NT$20 billion as of the end of September, China Rebar said.
The incident also affected Union Insurance Co (
As a result, Union Insurance's net worth is estimated to have fallen NT$271 million, the company said in a filing to the Taiwan Stock Exchange. Nevertheless the company was operating normally thus far and was not expected to be hit hard by the development.
Yesterday Taiwan Stock Exchange Corp said that shares of both companies would be suspended from trading today.
The two companies will also soon be delisted from the main bourse, according to the stock exchange regulator.
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