Dongyue Group (00189) issued an announcement regarding Dongyue Polymer (an indirect subsidiary of the company) and the financial roots of Xinhualian...
Zhitong Finance App News, Dongyue Group (00189) issued an announcement on matters relating to the revised continuing connected transaction between Dongyue Polymer (an indirect subsidiary of the Company) and Xinhualian Finance in accordance with the “Revised Agreement on the Financial Services Master Agreement”.
In order to supplement the Group's working capital, Dongyue Polymer issued a notice to Xinhualian Finance on March 28, 2024, stating that it would withdraw the deposit balance of approximately RMB 318.9 million (together with accrued interest) (no balance) stored by Dongyue Polymer in Xinhualian Finance until March 27, 2024. According to the notice, Xinhualian Finance must transfer the unwithdrawn balance to Dongyue Polymer's designated account on or before March 31, 2024. Otherwise, Dongyue Polymer will take action to enforce its legal rights. After this withdrawal, Dongyue Polymer has no intention of depositing any more deposits with Xinhualian Finance in accordance with the “Revised Agreement on Financial Services Master Agreement”.
Dongyue Polymer did not receive the outstanding balance before the specified deadline. As a result, Dongyue Polymer's Chinese legal adviser filed a lawsuit against Xinhualian Finance with the applicable Chinese court on April 1, 2024, requesting that Xinhualian Finance immediately return the outstanding balance. Dongyue Polymer later received a letter from Xinhualian Finance on April 2, 2024, stating that it was unable to refund the outstanding balance to Dongyue Polymer.
As stated in the announcement, the parties have a number of guarantee arrangements to guarantee the repayment liability of Xinhualian Finance in accordance with the “Revised Agreement on Financial Services Master Agreement”, including (but not limited to) share pledges provided by the pledger in shares equivalent to approximately 11.91% of Hunan Hualian Porcelain Co., Ltd. Hunan Hualian Porcelain Co., Ltd. is a company listed on the Shenzhen Stock Exchange (001216.SZ), mainly engaged in research, development, manufacturing and sales of ceramic products. Given that Dongyue Polymer has initiated legal procedures to recover unwithdrawn balances from Xinhualian Finance; the unwithdrawn balance currently has (including) the pledged shares described above as collateral; and the value of the pledged shares is higher than the unwithdrawn balance (calculated based on the closing price of the pledged target company's shares on the Shenzhen Stock Exchange on April 2, 2024), the company therefore believes that the risks inherent in recovering unwithdrawn balances from Xinhualian Finance are within manageable limits.