On December 11, Longhui announced that MOODY TECH HLDG (01400.HK) reported that its wholly-owned subsidiary, Fengtai (Hubei) Textile Co., Ltd., received two enforcement rulings from the Huangmei County People's Court in Hubei Province, stating that the group's factory building and land located in Huangmei Town, Huangmei County are used as collateral for a bank loan obtained from the local Banks (specifically Huangmei Rural Commercial Bank (the lender)) for a total principal amount of 90 million yuan. After two failed auctions, the property was transferred to the lender to settle the unpaid bank loan amounting to a total of 115.12 million yuan. The lender and its ultimate owner are independent from the company and its related persons. The company and its current Directors do not guarantee the bank loan, and no assets belonging to the company or its current Directors are used as collateral for this bank loan. After receiving this ruling, the company immediately sought advice from an independent Chinese law firm to determine the appropriate action to take.
Since the book value (pre-impairment) of the Huangmei property as of December 31, 2023, is approximately 157.9 million yuan, the group is estimated to record an impairment loss from the forced sale, which will need to be reviewed and confirmed by the group's auditor.
The Huangmei property is the factory for the group's fabric manufacturing Business. After the forced sale, the group will no longer operate the fabric manufacturing Business. Since the revenue generated from the fabric manufacturing Business accounted for less than 10% of the group's total revenue for the fiscal year ending December 31, 2023, and there was no revenue generated from the fabric manufacturing Business during the six months ending June 30, 2024, the company believes that the forced sale will not have a significant adverse impact on the group.
