Sunmoon Food Company has entered into a memorandum of understanding with Chic Foods Asia Pacific Co.

Under the deal, Chic Foods has agreed to invest in the company by way of a $24 million convertible loan and an additional optional $60 million convertible loan facility.

Both parties have also signed exclusive sourcing and service agreements.

Sunmoon Food says it will use the proceeds from the $24 million convertible loan extended by Chic to settle the outstanding principal of another convertible loan agreement signed on 21 March 2007 which amounts to $24.443 million, together with $6.433 million premium accruing.

The company also intends to apply the proceeds from the optional $60 million convertible loan facility extended by Chic to meet the working capital and capital expenditure requirements for the future expansion and development of the business of the company, and for funding of future acquisitions as and when such opportunities arise.

To facilitate the proposed transactions, Sunmoon Food is also proposing to undertake a 20:1 consolidation of all its issued ordinary shares in the capital of the company.