Ocean Grand says "significant shortfall of assets" likely

New York, Aug. 8 - Ocean Grand Holdings Ltd. said there is likely to be "a significant shortfall of assets" at Ocean Grand Holdings and Ocean Grand Chemicals Holdings Ltd., based on preliminary findings of the provisional liquidators.

The provisional liquidators also believe there "might have been" accounting irregularities at the two companies.

Bank lenders and noteholders were presented with the preliminary findings at a meeting on Friday.

The provisional liquidators also reported the findings to the Commercial Crime Bureau of the government of Hong Kong.

In addition, three independent non-executive directors of Ocean Grand Chemicals who have now resigned, Tommy Cheung Yu-yan, David Wan Ngar Yin and Yeh V-nee, requested the publication of information that provisional liquidators Deloitte Touche Tohmatsu noted that RMB 667.8 million was transferred from operating companies on July 16 and 17. Of this total, RMB 468.1 million was transferred outside the Ocean Grand Group while the payees for the remainder have not been confirmed. There was also a recent RMB 141.33 million payment from Ocean Grand Sanshui for which the identity of the payee has not been confirmed.

Legal representatives of the operating subsidiaries have confirmed to the Ocean Grand board they had no previous knowledge of the payments.

In addition RMB 158.1 million was transferred from the bank accounts of Kenlap Zhuhai on July 17 to payees outside the Ocean Grand group. The legal representative of Kenlap Zhuhai has confirmed to the board that he had no previous knowledge of the payments.

The information was included in the draft of the original liquidation announcement but not previously published because not all the directors agreed to include the information.

Deloitte Touche Tohmatsu was named provisional liquidator of Ocean Grand Holdings Ltd. and Ocean Grand Chemicals Holdings Ltd. on July 25.

Ocean Grand previously appointed Deloitte to assist the company in reviewing the cash positions of its operating subsidiaries.

According to the original announcement, during the course of the audit, which is still continuing, the auditors identified potential accounting irregularities concerning the recoverability and genuineness of certain accounts receivable, amounts payable, sales, purchases and other company transactions.

The irregularities were found among Ocean Grand subsidiaries including OG Foshan, OG Aluminum, Kenlap Zhuhai, Kenlap Chemicals and Kenlap PGC.

The company said at the time that its cash position had deteriorated to a level that was not sufficient to repay short-term debts.

Ocean Grand is a Hong Kong-based chemical company.

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