Midas CEO says shares and money in China subsidiaries and associates frozen by courts

Midas CEO says shares and money in China subsidiaries and associates frozen by courts

By: 
Chan Chao Peh
09/02/18, 12:13 am

SINGAPORE (Feb 9): Midas Holdings, the supplier of aluminium parts to the rail sector, has uncovered several litigations, enforcement orders and court documents involving its various subsidiaries and associate companies based in China.

The company also found out that certain sums of money and shares in these subsidiaries have been frozen by Chinese courts.

“As the company is still in the midst of fact findings, the board will continue to do assessment whether the group can continue as a going concern,” says Midas CEO Patrick Chew in a filing to the Singapore Exchange late Thursday night.

Midas shares have been halted from trading earlier in the day. Year to date, the stock has gained 77.8%. Last November, the company’s shares crashed by half. The company had cited reports of slowdown in China’s railway expansion as a possible reason for the drop. It has since recovered somewhat to last trade at 19.2 cents.

See: Has Midas been derailed by China's alleged crackdown on local infrastructure spending?

According to the latest announcement, Midas uncovered an enforcement order filed against wholly-owned subsidiary Jilin Midas Aluminium Industries Co for a previously undisclosed liability RMB30 million ($6.3 million).

And as at Dec 31 2012, some RMB12 million in “unaudited” ledger balances of Midas' China-based subsidiaries, out of a total of RMB873 million, were frozen on court orders.

Shares held by Midas in several China subsidiaries which were frozen included those in wholly-owned Luoyang Midas Aluminium Industries and Dalian Huicheng Aluminium, as well as associate company CRRC Nanjing Puzhen Rail Transport.

The three entities together account for 44.9% of Midas’ net asset value as of Sept 30, 2017, and 52.9% of Midas’ profit before tax for the nine months to Sept 30, 2017.

“The commercial operation of the above-mentioned entities are not affected by the freezing orders,” says Chew.

Meanwhile, the company says it also “uncovered a number of previously undisclosed corporations related to certain group companies incorporated in the China". The company also cannot confirm information on the shareholdings and businesses on these corporations.”

Chew says that Midas’ board is now “actively taking steps to gather information on the court documents and previously undisclosed corporations”. The board is also trying to ascertain whether there are other transactions in order to assess the overall exposure and legal implications for the group, and to protect the group’s assets.

“The board will also consider what actions should be taken to investigate the matters and determine whether any wrongdoings have been committed and any legal redress available to the company,” he adds.

Midas is appointing Dr Xu Wei Dong, an independent non-executive director, to act as the legal representative for all of Midas’ China-incorporate entities. Xu’s approval has to be sought for payments above RMB200,000.

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