Participation In Futures Speculation Leads To Financial Crisis, State Assets Saving Hualian Three Xin

Hualian Holdings (000036) participates in Zhejiang Hualian three Xin Petrochemical Co., Ltd. (referred to as "Hualian three Xin") because of the huge sums of money involved in futures speculation causing financial crisis, coupled with the textile and related industries slump and other reasons, Hualian three Xin has recently stopped production and discussed asset restructuring.

Now, the latest news from authoritative departments shows that the reorganization of Hualian three Xin has been preliminarily finalized.

The textile industry is a pillar industry in Shaoxing, Zhejiang. Hualian three Xin is the source and leading enterprise of Shaoxing textile industry.

According to the previous announcement of Hualian holdings, Hualian three Xin's current shareholding structure is: Jiangsu Huaxi Group holding 35.522%, Hualian Holdings 26.436%, Zhejiang prospect group holding 19.021%, Zhejiang Gabriel group holding 19.021%; as of June 30, 2008, Hualian three Xin achieved sales income 6 billion 210 million 150 thousand yuan, net profit -19615 million, total assets 10 billion 841 million 540 thousand yuan, net assets 1 billion 479 million 500 thousand yuan, asset liability ratio 86%, total liabilities 9 billion 300 million yuan.

It is reported that these loans involve prospective group, Gabriel group's two largest shareholders, affiliated enterprises and guarantee companies about 60 billion yuan assets, 30 billion yuan loan.

And Hualian three Xin tied the third largest shareholder Outlook Group, Gabriel group has also fallen into a serious financial crisis, waiting for the government to rescue, of which the owner of the Gabriel group has fled, and the prospect group has temporarily stopped production.

Therefore, for this chain of funds implicated in a series of enterprises, the local government has taken measures to rescue it. For example, if we want to stabilize bank loans, we will not repay loans to Hualian's three Xin and its parent enterprises and affiliated enterprises, do not draw capital, do not prosecute, give enterprises loans and increase loans.

At the same time, the local government departments have decided to carry out the asset reorganization of Hualian three Xin, which is basically determined by the largest shareholder of Huaxi Group and the Shaoxing Binhai Industrial Zone Investment Company (state-owned assets), respectively, to inject 1 billion yuan and 500 million yuan to restructure.

It is reported that this scheme has been agreed by the relevant shareholders.