Listed company Hailian International is seeking to raise fresh equity to make up for an unexpected $7 million increase in the cost of acquiring a university campus in China.
Listed company Hailian International is seeking to raise fresh equity to make up for an unexpected $7 million increase in the cost of acquiring a university campus in China.
Perth-based Hailian needs to pay $10.7 million (RMB 63 million) by the end of August in order to obtain full title over Chongqing Hailian University’s land and buildings.
The depth of the company’s funding crisis was revealed by its inability to make a $400,000 payment due on June 30.
Hailian said it had negotiated an interim funding facility so that it could make the June 30 payment but the funds were not received.
The hefty payments due to be made by the company compare with its modest cash reserves of $1.9 million as at March 31 2004, which included $1.4 million raised from investors earlier that month.
The company (formerly Amnet) has already used most of that money to make two debt repayments totalling $1.6 million.
In its latest release to the Australian Stock Exchange, the company has conceded that information provided to investors at the time of the March capital raising was “patently wrong and misleading”.
The current attempt to raise extra capital follows the belated discovery that creditors of Meridian Property – which was the vendor of the university land and is now in liquidation – hold an interest in the land.
Hailian said this was contrary to an agreement with its China-based director, Professor Ling Xiao, that “expressly states that the Meridian land was free of all third party interests”.
The company also belatedly discovered that Professor Ling Xiao “committed to a completely revised payment schedule with the court without the advice or approval of the board”.
Hailian acquired the private Chongqing Hailian University, located in western China, in September 2002.
As a result of the acquisition, Professor Ling Xiao, who established the university, became Hailian’s largest shareholder with a 44 per cent stake and joined its board.
Hailian’s latest accounts, for the half-year to December 2003, disclose that the university’s operating revenue increased by 56 per cent to $2.3 million, helped by a 31 per cent increase in student numbers to 6,413.
Hailian’s shares, which last traded at 12 cents, are suspended from quotation.
