Liquidation of Midas Holdings' subsidiaries gets go-ahead

Midas said it is insolvent, its assets are not enough to cover its reported liabilities and prospects of rescue appear dim.

The subsidiaries of Singapore-listed Midas Holdings will go through liquidation after several courts approved of the move, an announcement revealed. The company’s operations were stopped short last year after regulators called out board members for making unauthorised and fake loans on behalf of the company.

The judicial manager, Qiming, of Jilin Midas proposed to sell all the business assets to Jin Dou for $354.99m (RMB1.76b). Various creditors groups voted on the proposal on 22 February 2019. On 22 March 2019, the Liaoyuan Court approved the sale.

Qiming proposed to write off the equity held by Jilin Midas subsidiary North East Industries (NEI). It has also disputed the $67.98m (RMB337m) of dividends on the basis that profits recorded at Jilin Midas for previous years to be wrong.

Meanwhile, as Jilin Midas Light Alloy (JMLA) is considered “not commercially viable,” judicial manager Gongcheng is unable to find any interested buyer for its business assets and proposed for the subsidiary to be liquidated. The judicial managers of Luoyang Midas Aluminium Industries (Luoyang Midas) are also unable to identify buyers for the business’ assets

Meanwhile, Dalian Huicheng Aluminium Industries (DLHC) had until 28 March to restructure DLHC. According to Midas, as all of its material assets have been pledged, it is unlikely to have any net balance in a liquidation.

“The report also noted that the financial accounts to be improper and off-balance sheet accounts have been used to transfer funds,” Midas added.

Land and buildings owned by Shanxi Wanshida Engineering Plastics (Wanshida) were pledged to Shanxi Rural Credit Cooperative for an undisclosed $2.82m (RMB14m) loan. However, auditors for Wanshida have changed multuple times between 2014 to 2017, so the audited accounts of Wanshida cannot be located and thus the directors cannot file any police report.

Midas’ 32.5% share in CRRC Nanjing Puzhen Rail Transport (NPRT) was pledged to noteholders for US$60m and their related coupons have become due.

“As the board felt the pledge was not properly approved by the board, we are contesting the claim made at the Hong Kong International Arbitration Court. Due to the shortage of funds, we are not represented by any legal professionals for the proceedings at HKIAC. If we are successful in contesting the validity of the pledge, NPRT will still likely be sold and the proceeds distributed pro rata among all accredited creditors of Midas,” Midas added.

Midas also had some guarantees that are enforceable if the related loans remained unpaid after payouts by the judicial management, sale of pledge assets, etc. As the payouts and assets sale will not occur so soon, the final amount due from Midas is unknown. “This uncertainty makes a rescue involving Midas difficult,” it said.

Midas is insolvent, its assets are not enough to cover its reported liabilities and prospects of rescue appear dim, the company said.

Midas also tried to contact former chairman Chen Wei Ping, who was guaranteed notes from Midas’ US$7.3m judgement debt awarded in favour of CRRC (HK). However, efforts to initiate a discussion with CRRC with a view to rescuing the company was not successful.

Many government agencies are also pressing Midas to file annual returns, file tax returns, and hold AGM. “In the absence of a rescue and dwindling funds, Midas will be unable to maintain its listing status at SGX and HKSE, its company secretaries, share registrar etc. The current staffing of two persons also make fulfilling the compliance obligations of the dual SGX and HKSE listed Midas challenging,” it said.

On 29 March 2018, Midas announced it has lodged a report with the Commercial Affairs Department of the Singapore Police Force. “We do not have the necessary documentation and resources to lodge reports against the financial professionals in the PRC. As the judicial managers are answerable to the courts and the accounts are reviewed by them, such reporting of wrongdoings will be their purview,” it added.

However, it has lodged complaints to the relevant bodies in Singapore overseeing accounting professionals based in Singapore; such as Accounting and Corporate Regulatory Authority (ACRA) and the Institute of Singapore Chartered Accountants (ISCA). The initial reports to ACRA were made on 4 May 2018 and ISCA was made on 19 November 2018. To date, Midas said it has not received any outcome of the enquiries conducted by ACRA and ISCA.