Published May 8, 2009

Outgoing CEO loses all shares in Sino-Env

By LYNETTE KHOO

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SINO-ENVIRONMENT Technology Group's outgoing chairman and chief executive Sun Jiangrong has lost all his shares in the group, following an enforcement on his remaining 6.23 per cent stake by his creditor.

This enforcement of 21.13 million shares took place on Wednesday, a filing by the group yesterday showed.

This has raised the deemed stake held by the creditor Stark Investments (Hong Kong) Ltd to 18.74 per cent from 12.5 per cent.

The latest development adds further uncertainty to whether Mr Sun will withdraw his resignation as chairman and CEO.

Mr Sun held an initial 56.29 per cent stake in Sino-Environment through Thumb (China) Holdings Group but had pledged the entire stake and other personal assets for $120 million worth of original notes in August 2007.

An outstanding $65 million became due on Feb 16. Following a default on this loan, Mr Sun's stake was reduced as the creditor enforced its rights on the pledged shares and force- sold the shares in the open market.

As Mr Sun had ceased to be the controlling shareholder of Sino-Environment, he and his key managers tendered their resignations on Tuesday. The managers were chief operating officer You Shengquan; chief technical officer Li Shouxin; and Lin Xin, financial controller of the company's Chinese subsidiaries.

Independent directors (IDs) at Sino-Environment yesterday reiterated their view that the resignations of the key managers are detrimental to the interests of the company as the current business contracts, and the external and internal operations, of the company may be adversely affected.

This has raised doubts about the group's ability to continue as a going concern.

The IDs have requested the key managers to reconsider their resignations and are now awaiting their response.

Also at stake is the status of the group's $149 million convertible bonds.

A change in controlling stakeholding allows bondholders an early redemption of the convertible bonds and may crystallise defaults on the corresponding swap arrangement that the group has with the bondholders.

This week, Sino-Environment disclosed that substantial bondholders have submitted a letter through their lawyers to the group requesting that it take immediate steps to identify and safeguard its cash position and curtail any unnecessary expenditure.