China Milk CFO resigns amid default following convertibles put; company's future uncertain

By Jennifer Chiou

New York, Feb. 22 - China Milk Products Group Ltd. responded to inquiries from the Singapore Exchange Securities Trading Ltd. regarding the company's reported lack of funds for the early redemption of its $150 million of zero-coupon convertible bonds due 2012 and announced the resignation of its chief financial officer, according to a company news release on Monday.

The company first announced on Feb. 12 that it did not have sufficient funds for the early redemption of the bonds.

In its current response, China Milk said that management has represented to its directors that it actually has sufficient funds in its bank accounts to meet the bonds' obligation. The company said that its board intends to independently affirm this position.

The company added that it has not been able to pay its liabilities, stating that, technically, its ability to operate as a going concern may be in doubt. China Milk said it is working with management to complete their latest quarterly results.

On Jan. 5, the company received valid put exercise notices from holders of roughly $146 million of the bonds, which were issued in January 2007.

The company previously said it was exploring different options for funding requirements and added that it intended to attempt to work with holders on a mutually acceptable arrangement. It is still looking to work with bondholders.

China Milk's board reiterated that it has yet to engage any advisers, adding that it cannot provide a timeline for its actions for the bonds at this time, especially due to the "abrupt" departure of its CFO, the release said.

As previously reported, the company is awaiting clearance from the State Administration of Foreign Exchange of the People's Republic of China for the remittance out of China of $170.56 million. China Milk had said it believed the delay was administrative and not the result of a legal obstacle.

According to China Milk, the amount is for the full settlement of the early redemption at the option of bondholders, including interest.

China Milk is a Heilongjiang Province, China-based supplier of raw milk, pedigree bull semen and dairy cow embryos.

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