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Ailing Ultrasonic in bank talks to avoid insolvency
September 18, 2014 / 3:30 PM / 3 years ago

Ailing Ultrasonic in bank talks to avoid insolvency

FRANKFURT/HONG KONG (Reuters) - Ultrasonic US5.DE launched talks with creditors to try and avoid an insolvency and formally fired its two top executives on Thursday after they disappeared along with the Chinese shoemaker’s cash.

Earlier this week, the German-listed firm said chief executive Qingyong Wu and chief operating officer Minghong Wu had gone missing at the weekend, and most of its cash reserves in China and Hong Kong had vanished.

Ultrasonic said in a statement on Thursday that the company’s supervisory board had dismissed them, saying they had drawn down a credit facility in August and transferred the money to China from Hong Kong before disappearing.

Shares in Ultrasonic fell by more than a third and have lost more than 80 percent of their value in the past week. The shares were down 39 percent on the day at 1.33 euros after trading near 7 euros one week ago.

The Ultrasonic scandal follows similar problems with other China-based German-listed companies and has led to calls for investors to refrain from investing in unknown Chinese firms.

German-listed Chinese manufacturer, Youbisheng Green Paper YB1.DE, started insolvency proceedings earlier this year after its CEO went absent without explanation. Chinese fashion group Kinghero KH6G.DE accused its former chief executive of breach of fiduciary trust and later sought to delist.

Ultrasonic also said it had defaulted on a $60 million credit facility secured in August to fund an expansion drive.

The seven lenders behind the loan, led by Cathay United Bank, prepared to take legal action against the company, banking sources with direct knowledge of the matter said.

At the same time, creditors agreed to negotiate with chief financial officer Chi Kwong Clifford Chan and the supervisory board of Ultrasonic AG to avoid an insolvency, Ultrasonic said.

Chan was due to resign on Sept. 30 but agreed to remain in his post after his designated successor rescinded his contract during the turmoil that followed the executives’ disappearance, the company said.

Reporting by Edward Taylor in Frankfurt, Carol Zhong, Yimou Lee and Donny Kwok in Hong Kong, writing by Thomas Atkins; editing by David Clarke

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