Ailing Chinese dairy processor Huishan Dairy has received a demand from lenders for the payment by the end of tomorrow of loans worth US$220m.

In a filing with the Hong Kong Stock Exchange, Huishan Dairy said it received two letters from HSBC in which the banking giant claimed “one or more events of default” under a facility worth US$200m “have occurred and were continuing”.

Huishan Dairy, which has been rocked by allegations of the misappropriation of funds by chairman and controlling shareholder Yang Kai – claims denied – and the collapse of its board of directors, revealed HSBC said the business the loans and interest outstanding under the agreement were “immediately due and payable”. Huishan Dairy has within three days from 11 September to pay up. Interest amounts to US$5.8m.

HSBC sent Huishan Dairy a third letter on 11 September about another facility made available to the business in 2014. HSBC is asking for the immediate repayment of US$13.7m.

Huishan Dairy said it is taking legal advice and added it “believes that any repayment arrangements will be considered together” with the debt restructuring proposals it announced in July. “The company continues to be in dialogue with its major bank creditors in the PRC about its debt restructuring,” it said.

Two months, Huishan Dairy outlined plans to give creditors shares in the business, with the Chinese group also proposing to hand a stake to management while the company looks for a “white knight”.

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By GlobalData

The business plans to group its operations, as well as some other interests held by chairman and controlling shareholder Yang Kai, into a holding company. The listed Huishan Dairy would own the holding company, with its own shares then carved up.

Trading in Huishan Dairy shares remains suspended.

It was on 24 March when Huishan Dairy halted the trading in its shares in Hong Kong after the company’s stock plummeted by over 85%.

The slump was reportedly due to a short-seller attack. The fall in the value of Huishan Dairy’s shares had come after allegations a “major shareholder” in Huishan Dairy had used CNY3bn  on the dairy firm’s balance sheet to invest in Chinese real estate and was unable to recoup the money.

The following week, Huishan Dairy provided an update on its financial position, revealing it had met with its creditors after missing interest payments. 

However, in a stock market filing, Huishan Dairy insisted it did not believe there was “any misappropriation”, while it has met with government officials and creditors to discuss its payments.