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Nightmare deepens for Millennium & Copthorne Chinese JV

Friday 16th April 2010

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NZX-listed hoteliers Millennium & Copthorne reported more unauthorised asset sales by a former senior executive, leaving the New Zealand group's Chinese joint venture with less than a third of the portfolio it owned a week ago and $26.1 million out of pocket. Worse still, the company says further unauthorised disposals by former executive Cheung Ping Kwong can’t be ruled out.

Cheung made unauthorised sales of a further US$2.5 million of properties on Tuesday this week, comprising an 85% interest in the Kangxie portfolio of two parcels of development land in Guangdong province, and a 70% interest in a landscaping and an associated nursery business, trading as Caribbean.

This was on top of unauthorised sales of properties in the Hainan and Guandong provinces last week representing worth US$47.8 million, of which US$16.3 million belongs to Millennium and Copthorne, which is a 34% participant in the joint venture in China.

The New Zealand group became involved in the Chinese developments in September 2007, taking a 34% holding in First Sponsor Capital Ltd. (FSCL), which owned interests in a series of subsidiaries and associated developments.  Cheung was a 20% shareholder in one of the subsidiaries. He was sacked last November as chief executive of the holding company developing the Hainan and Guandong properties, having failed to meet the terms of the JV agreement.

The latest unauthorised sales, whose overturning will require cooperation from relevant Chinese authorities, take the total loss for Millennium & Copthorne to NZ$26.1 million.

FSCL still owns properties in Sichuan province, Millennium said in a statement to the NZX after close of trading.  Company executives had not responded to calls last night by time of publication to comment on whether any assets remain now other than the holdings in Sichuan.

The joint venture said on Monday it had cancelled old company seals and issued new ones, ahead of Tuesday's additional transactions.  On Wednesday, a day after the latest unauthorised asset sales, it advertised the changes in "a public notice in a major newspaper in China".

Millennium shares were unchanged at 45 cents yesterday, before the update statement was issued to the NZX. The stock has fallen 3 cents since the first disclosures on Monday.

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