Cathay United Bank Co (國泰世華銀行), the banking arm of Cathay Financial Holding Co (國泰金控), yesterday said it is taking legal action against Nomura International Ltd (Hong Kong), along with five other Taiwanese banks, for oversights in a botched US$60 million syndicated loan to an ailing Chinese footwear company in 2014.
In August 2014, Cathay United Bank, Chang Hwa Commercial Bank (彰化商業銀行), Taiwan Cooperative Bank (合作金庫銀行), KGI Bank (凱基銀行) — then known as Cosmos Bank (萬泰銀行) — Hwatai Commercial Bank (華泰銀行) and Taiwan Business Bank (臺灣企銀) participated in a US$60 million unsecured syndicated loan that was arranged by Nomura Hong Kong.
However, shortly after the funds were transferred to Fujian Ultrasonic Shoes Co Ltd (福建索力鞋業), the Chinese footwear manufacturer’s chief executive officer Wu Qingyong (吳清勇) and chief operating officer Wu Minghong (吳明鴻) went missing, along with most of the company’s cash reserves in China and Hong Kong.
Following continued efforts to recover the delinquent loan, it was discovered that Nomura Hong Kong had failed to meet its obligations in arranging the syndicated loan.
Ultrasonic Shoes told lenders that Nomura Singapore Ltd did not furnish its US$9 million portion of the syndicated loan as stipulated by the terms arranged by Nomura Hong Kong, Cathay United Bank said in the statement.
Instead, the money had come out of Ultrasonic’s books. Nomura Hong Kong told the footware company that the practice was the “norm” in international syndicated loans in China and that without the funds the deal would fall through, forfeiting previously paid fees.
The six Taiwanese banks had no knowledge of the arrangements made by Nomura Hong Kong that skirted its commitments to the deal, Cathay United Bank said.
Ultrasonic told debtors that Nomura Hong Kong provided specific instructions on meeting internal control and auditing requirements to successfully carry out the syndicated loan.
Initially, the group of Taiwanese lenders speculated that the footwear company was slandering Nomura Hong Kong.
However, following more than a year of investigations into evidence provided by Ultrasonic, they were able to verify Nomura Holding’s wrongdoing, Cathay United Bank said.
The six Taiwanese banks said they would continue to work with authorities in Taiwan and China and expressed their resolve to unite in combating disreputable financial practices, as domestic institutions expand further into the Asian markets.
Ultrasonic last reported a net income of 35 million euros (US$40 million) for 2013. Its shares are currently trading at about 0.05 euros on the Frankfurt bourse.
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