China Star May Win RMB 4.2 Bln Debt Exemption
Sohu IT, 2/28/13
In its annual report, released February 27, Chinese consumer electronics manufacturer TCL Corporation (000100.SZ) revealed that subsidiary Shenzhen China Star Optoelectronics Technology had sales revenues of RMB 7.237 bln for 2012, with net profits of RMB 315 mln and operating losses of RMB 63 mln. In addition, RMB 4.2 bln owed by China Star to its second-largest shareholder, Shenzhen Century Science & Technology Investment Corporation (Century Corporation), in the form of entrusted loans, may be completely waived.
A supplemental note to the financial report indicates that China Star took out an additional RMB 4.245 bln in entrusted loans in 2012. Century Science & Technology made up to RMB 5.41 bln in interest-free entrusted loans available to the company as project development funds, with the RMB 5.52 bln in assets resulting from the funds serving as collateral for the entrusted loans. After the second phase of mass production at China Star resulted in three consecutive months of production at the target volume of 90,000 panels per month, as assessed and verified by a professional organization agreed upon by China Star and Century Science & Technology, the Shenzhen municipal government agreed to cancel asset collateral procedures and issue an exemption for the entire amount of up to RMB 5.41 bln in entrusted loans. The entrusted loans are set to mature on June 30, 2013, at which point the company will move the amount from under the heading of long-term loans to liquid assets.
A spokesperson for TCL Corporation said that this had been one of the conditions contractually set when China Star was first established. The company's production capacity following the start of mass production is still being evaluated, the spokesperson said. If actual capacity meets set targets, Century Science & Technology will report as much to the Shenzhen municipal government. It is still uncertain whether or not the municipal government will agree to exempt the loans, the spokesperson said, and the accounting procedures involved are similarly uncertain.
According to publicly available documents, China Star Optoelectronics has already met targets for mass production capacity. Figures in TCL Corporation's monthly products sales figures releases indicate that in the months from September 2012 to December 2012, China Star produced 108,000, 110,000, and 112,000 LCD glass substrate panels, respectively. TCL Corporation says that management is cautiously optimistic about China Star's performance in 2013, and expects that the company will produce 18 mln LCD glass substrate panels and assemblies over the course of the year.
Editor's Note: For more background on this topic, please see "China Star Cumulative LCD Panel Shipments Exceed 10 Mln Units" MD 12/17/12 issue.
Keywords: debt financing hardware production capacity LCD TCL Corporation 000100.SZ China Star Optoelectronics profit revenue fiscal report Century Corporation display
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