13 May 2022 17:19:00
Clarification of news or information requested by SET (Additional)
SET requests to clarify news or information Subject : Clarification of news or information requested by SET Description : -Translation- ELCIDACAP011/2022 13 May 2022 Subject: Clarification information regarding to the Company's 2021 Financial Statements as requested by the SET (Additional) To: President The Stock Exchange of Thailand Reference to the Stock Exchange of Thailand letter no. BorJor. 162/2022 dated 8 April 2022 requested to clarify information regarding to 2021 financial statements and additional information regarding to the Company's internal control since the auditor has declared in the audit summary with no expression of audit opinion due to uncertainty of many significant matters which may cause material uncertainties that may cast significant doubt on the ability to continue operating. As well as the Securities and Exchange Commission ("SEC") has accused former directors and executives of the Company and associates in total of 6 persons related to fraud and unlawful exploitation that caused damage to the Company. In order to provide investors with complete information and be able to make any decision, Asia Capital Group Public Company Limited ("the Company") would like to clarify additional information as follows: 1. The Company's business operation status Refer to the Company's 2021 financial statements, interest income was 23 million baht with defaulted loans to other companies in the amount of 2,371 million baht, decreased 162 million baht from 2,533 million baht in 2021. On 21 October 2021, the Company clarified that the Company has delayed new loans granted since the Company has implemented new credit rules and risk criteria for new loans by implement guidelines on 1 June 2020 that may cause least damage. Most of defaulted loans are during litigation process and some cases are during process of debt restructuring that expected to be completed within December 2021. In addition, refer to the company's letter no. ELCIDACAP025/2021 Subject:Clarification additional information regarding to the Company's business operation dated 21 October 2021, the Company had 7 new loans cases during consideration in the amount of 120 million baht comprised of 3 commercial loans with loans limit to 120 million baht and 4 personal loans with loans limit of 0.12 million baht. These new loans expected to be completed within December 2021. The Company would like to clarify as follows: 1.1 Status of 2,371 million baht defaulted loans including loans amount, collateral value, legal status, progress of debt restructuring that expect to be complete within December 2021, operation plan to be able to re-recognize interest income and expected timeline to recognize interest income from defaulted loans. Explain by each customer: Answer 1.1 The Company would like to clarify status of defaulted loans in the amount of 2,371 million baht as follows: Unit: Million baht Defaulted loans Defaulted date Stop-accrued date Amount Collateral value (Accounting value) Operation activities Defaulted loans 1.Customers with common shares as collateral 162 257 - Customer no.1 (BE receivable) 15 Nov.19 15 Nov.19 - - 1. Prosecuted on 27 Mar.20 2. The court call witnesses on 30 Sep.21 (The court canceled the appointment and made new appointment for call witnesses on 26 Jan22) 3. Repay loans amount closed account on 22 Nov.21 Customer has settled debt with cash and closed account according to balance of 3 BE bills and the collateral shares have been returned successfully on 22 Nov. 21 - Customer no.2 (BE receivable) 20 Sep.19 20 Sep.19 - - 1. Prosecuted on 7 Nov.19 2. Court delivered judgement on 25 Nov.20to pay off principal in full amount with 7.5% interest 3. The Company filedsubpoena to appoint executing officer on 16 Jul.21 (during printing process) 4. Repay loans amount closed account on 22 Nov.21 Customer has settled debt with cash and closed account according to balance of 2 BE bills and the collateral shares have been returned successfully on 22 Nov. 21 Defaulted loans Defaulted date Stop-accrued date Amount Collateral value (Accounting value) Operation activities Defaulted loans 2.Customers with properties as collateral 1,575 1,217 - Customer no.1 30 Jun.17 1 Jan.18 - - 1.Date request for repayment followed preferential rights on 1 Mar.17 (according to creditor's rights), after this customer was sued by other creditor 2.The Company bought assets at Legal Execution Department to sell on 20 Feb.21 3.Debtor requested the revocation of sale and termination of the execution, waiting for hearing process on 30 Nov.21 4. The court dismissed the petition of customer that filed the enforcement action on 30 Nov.64 5. The court dismissed the petition of customer to cancel the forced sales of asset on 21 Dec.21 6. On 13 Dec.21, the debtor filed an appeal against the order in the event that the Court of First Instance dismissed the petition to suspend the execution. Currently, during pending an order from the Court of Appeal 7. On 19 Jan.22, the debtor filed an appeal against the order in the event that the Court of First Instance dismissed the request for revocation of the sale. Currently, during pending an order from the Court of Appeal The Company has already transferred ownership of the collateral. However, the Company has not recognized interest income from this receivable in the 4th quarter of 2021 since the Company received payment in form of assets obtained from the auction process at the Legal Execution Department. Moreover, the Company has already recognized interest income since 2017. Defaulted loans Defaulted date Stop-accrued date Amount Collateral value (Accounting value) Operation activities Defaulted loans 8. The Company has already transferred ownership of collateral asset on 23 Feb.22 - Customer no.2 28 Mar.19 16 Jul.19 - - 1. Customer has negotiated to sell asset to repay loans according to letter dated 30 Sep. 20 and at present, the property cannot be sold 2. During assign lawyer to prepare notice for further litigation process. The lawsuit is expected to be completed in the 3rd quarter of 2022. Progress will be updated Debtor sells asset to repay loans - Customer no.3 24 Mar.19 20 Sep.19 - - 1.The Company has transferred right to sue to one of financial institution torequest for loans 2.Financial institution is in the process of suing for collateral enforcement, hearing for witness will be on 9 Nov.21 3. The court postponed the appointment of hearing for witness to 6-8 Jun.23 When financial institution finish seizing and selling collateral, the Company can return loans to financial institution simultaneously - Customer no.4 20 Apr.17 13 Feb.18 - - 1.Prosecuted on 1 Aug.18 2.Court judged on 28 Nov.20 3.Auction 2 times, no buyers yet (pending for 3rd auction). The last auction date was on 20 Mar.21. Currently, during waiting for the next schedule of auction date When assets has been sold, the Company will receive payment in the full amount Defaulted loans Defaulted date Stop-accrued date Amount Collateral value (Accounting value) Operation activities Defaulted loans - Customer no.5 18 Sep.19 19 Sep.19 - - 1.Customer informed that during process to find joint investment with one of listed company (according to letter dated 7 Jun.21) 2. During negotiation to restructuring loans which expect to be complete within Dec.21, may cause customer to have ability to repay loans. Negotiation is not completed. 3. During assign lawyer to prepare notice for further litigation process. The lawsuit is expected to be completed in the 3rd quarter of 2022. Progress will be updated Prosecution and execution for auction, the Company will be repaid loans 3.Customer with leasehold right as collateral 20 Nov.18 28 Jun.19 491 598 1. Not prosecuted since the leasehold's owner who is educational institution has transferred right to OK CASH on 15 Jul.20. The leasehold rights on land and buildings of Community Mall, located on soi On Nut, Bangkok with lease term began in 2015 and will be ended in 2038 2.The Company and subsidiaries has filed a lawsuit for eviction on 4 Dec.20, the court scheduled an hearing on 23 Sep 21and postponed the hearing to 3 Nov.21 3. The court has scheduled a hearing for the prosecution's witnesses and the defendantson 7-9 Dec.22 1.Management fee income 2.Rental fee income 3.Income from sales of leasehold right to outside person with covered loans value Defaulted loans Defaulted date Stop-accrued date Amount Collateral value (Accounting value) Operation activities Defaulted loans 4.Customer within litigation process Jun.18 20 Aug.18 304 Transfer right to receive cash from one of SET listed company 1. Prosecuted on 20 Aug.18, the court sentenced the debtor to pay the debt on June 10, 2020. 2.On 25 Nov.20, the debtor applealed 3.The court scheduled to hear the judgment on 28 Sep.21, the Appeal court has postponed to 20 Jan. 65 4. The Court of Appeal upheld the standing order by the lower court. 5.The Company filed a request to issue an order for the debtor to comply with the Court of Appeal 6. The debtor submitted a petition to request permission to petition and request permission to suspend the execution on 9 Mar.22 7.The Company filed an objection to the Supreme Court's request for permission and filed an objection to the enforcement action on 4 Apr.22 8.On 11 Apr.22, the debtor filed a request to withdraw the execution and the Company filed an objection to the withdrawal of the execution on 26 Apr.22. Currently, pending for the results of the trial by the Court of First Instance The Company has issued a warrant to appoint an executing officer to carry out to freeze of assets Total defaulted non-performing loans 2,371 1,815 Performance summary from the above table: Customer group 1 : Customers with common shares as collateral Both customers paid off loans and already closed account. Customer group 2 : Customers with properties as collateral Customer no.1, the Company has already transferred ownership of land collateral to the Company Customer group 4 : Customer within litigation process The Company has issued a warrant to appoint an executing officer to carry out to freeze of assets. 1.2 Summary of the decrease of 162 million baht defaulted loans including loans amount, collateral value, payment type and recognized interest income. Explain by each customer: Answer 1.2 The Company would like to clarify that defaulted loans decreased 162 million baht from repayment of 2 customers, details provided below: Debt amount : Million baht Collateral value Type of collateral Payment type Interest income Payment date Principal Accrued interest Total As of 30 Sep.21 As of 30 Sep.21 Customer no.1 (BE receivable) 90.00 2.46 92.46 154.71 common shares listed in SET Customer has settled debt with cash and closed account according to balance of 3 BE bills and the collateral shares have been returned successfully on 22 Nov. 21 10.98 22 Nov.21 Customer no.2 (BE receivable) 70.00 - 70.00 83.55 common shares listed in SET Customer has settled debt with cash and closed account according to balance of 2 BE bills and the collateral shares have been returned successfully on 22 Nov. 21 11.62 22 Nov.21 Total 160.00 2.46 162.46 238.26 22.60 The Company has already received debt payment according to BEs from both debtors in the amount of 185.07 million baht in cash on 22 Nov.21. In addition, the Company recognized interest income in the amount of 22.6 million baht in the fourth quarter of 2021. 1.3 The results of 7 new loans with a total credit line of 120 million baht including loans amount, collateral value, loans period specified start-end date, interest rate, recognized interest income and reasons of approval or rejection. Explain by each loans customer. At present, does the Company have pending loans for consideration? Answer 1.3 The Company would like to clarify that the Company considered personal loans for 4 customers in the amount of 120,000 baht which all 4 were not passed the criteria due to credit bureau results. The resulted shown that loans applicants has relatively high debt burden which may cause the ability to pay off the debt in the future. In addition, the Company has considered 3 customers applying for commercial loans in the amount of approximately 120 million baht. All 3 customers were not achieved the criteria. Details of each customer provided below: - Customer 1 The company applying for loans is in the apartment rental business. The company offerred land and building of the apartment located in Bangkok as collateral. This customer is disqualified as the collateral is located in the area which could affect future sales liquidity. - Customer 2 The company applying for loans is in the construction business. The company offerred collateral as a transfer of the right to receive money. This customer is disqualified since it is the transfer of construction rights from the employer to a private company, there is a risk of receiving money and there is no asset as collateral. - Customer 3 The company applying for loans is in property development sector. The company offered land located in Chonburi Province as collateral. This customer is disqualified due to the appraised value of the property is much lower than loans limit. Loans could not be settled. However, at present there are 2 customers pending for loans consideration, approximately 72 million baht loans amount. Loans consideration is expected to be finalized within the second quarter of 2022. Summary is provided as follows: - Customer 1 The company applied for loans with a credit limit of 17 million baht. The company is in the business of producing paper boxes and the objective of loans is to acquire old factory - Customer 2 The company applied for loans with a credit limit of 55 million baht. The company is in the scrap trading business and the objectives of loans are to refinance and working capital 1.4 The current business activities of the Company and its subsidiaries that the Board of Directors realize that generate the main source of income, sources of funds used in the lending business and Board of Directors' opinions Answer 1.4 Company Income-generated activities The Company - Expand to small and medium-sized loans with collateral - Expand credit limit for customers - The Company has received repayments from 2 defaulted loans in the amount of 185.07 million baht and transferred ownership of collateral from auction process of 1 case of defaulted loans CAPOK - During preparation to improve and develop the full lending procedure OK CASH - Expand credit limit - Debt restructuring - Negotiate to reduce interest to return debt - Collection CIMAGE - Business activities to generate income including revenue from sales and rental of office building, warehouse in Bangkok and vicinity area Source of funds for business operation comes from the repayment of debts from some debtors who repaid in form of cash and assets transferred which will be developed or improved for further sale or rent. The opinion of the Audit Committee regarding to business activities that generate main income, the Audit Committee has recommended to develope or improve assets for sale or rent. 2. Reversal of credit loss allowance 2.1 As at 31 Decenber 2021, the Company's equity was 114 million baht. Refer to notes to financial statements no. 15, 15.3 and 32.5, the Company reversed credit loss allowance of 2 customers which results of lawsuits are not yet finalized in the amount of 161 million baht as follows: SET would like the Company to explain the reasons of credit loss allowance reversal while results of lawsuits are not yet finalized. Criteria and information used for consideration such as opinion from expertise, potential of lawsuits, and debtor's ability to repay loans. Please describe by each customer. The Company would like to clarify as follows: Customer Defaulted loans Reversal credit loss Explanation No. 1 283.15 91.66 The debtor was subjected to legal execution and the property was sold at public auction. The Company has already won the auction to purchase of the property and transferred the ownership which could be considered that the debt had been paid off. Opinion from legal advisor commented that once the assets had been transferred, the case arising from auction sale will not affect to the Company. Full amount of reserve has been reversed. Litigation 19 February 2021 Debtor sued the court's judgment to the Civil Court 20 February 2021 The Company entered into a land and building purchase agreement of collateral with the Legal Execution Department 30 November 2021 The Civil Court dismissed the petition to suspend the execution 13 December 2021 Debtor filed an appeal against the court's order. Currently, pending for an order from the Court of Appeal 23 February 2022 The Company has already transferred right of collateral asset and reversed the allowance in the fiscal year 2021 No. 2 304.47 68.51 The Company reversed allowance as a result of the verdict of the Court of Appeal upheld the judgment of the Civil Court. The defendant has less chance to be granted a petition (refer to legal opinion). The Company expects to repay loans within 1 year. Currenlt, the Company has issued a warrant to appoint an executing officer to carry out to freeze of assets. In addition, debtor has started to book allowance as if acknowledge the loss that may occur Litigation 20 August 2018 The Company sued debtor and partner company (1) to Civil court to repay loans to the Company 10 June 2020 The Civil Court sentenced the debtor's partner to pay the Company 290 million baht 25 November 2020 The debtor's partner filed an appeal 20 January 2022 The Court of Appeal upheld the judgment of the Civil Court and reversed the allowance in the 2021 financial statement. Currently, the case is during the period of exercise the supreme right. The debtor submitted a petition to request permission to petition and request permission to suspend the execution on 9 Mar.22 2.2 From notes to financial statement no. 32.6, The Company was sued by a debtor for breach of contract and demand compensation for repayment for unfair contract by paying compensation of 223 million baht with 7.5% interest rate from the sue date. And, the company has to accept payment of 237 million baht from debtors, and redeem the mortgage of the land and all the pledged shares to the debtor. On 11 October 2021, the court ordered the temporary disposition of the case since the Company has filed a request for business rehabilitation. The Court scheduled an appointment to hear the result of business rehabilitation on 7 March 2022. Managements of the Company believe that the case does not have a significant impact on the financial statements therefore did not record any liabilities that may arise from such lawsuits. SET would like the Company to explain the lawsuit that the Company was being sued by the debtor for damages including debtor who sued the Company, reasons for suing, value of damage that expected to be paid, progress of the court meeting on 7 March 2022, information and criteria that Management used for consideration to ensure that the outcome of the lawsuit may not have a significant impact on the financial statements and that contingent liabilities are not recorded. The Company would like to clarify that based on notes to financial statements no. 32.6, the Company has property collateral value which is higher that loans value. The case that the Company was sued by debtor and asked for damages, this debtor was ordered by the court to pay the debt to the Company and asset has been sold out at auction by the Legal Execution Department. Whilst this debtor delayed the sale at auction in accordance with the judicial process and also sued the Company for unfair contract and claim damages. This is a way the debtor fight for justice while being forced to sell at auction. From the Company's legal department opinion claimed that the Company has not breached the contract. The claim for damages as stated is not true in many aspects and has no right to sue (from legal opinion dated 10 June 2021). The Company believe that the case does not have a significant impact on the financial statements therefore did not record any liabilities that may arise from such lawsuits. On 7 March 2022, the Civil Court has ordered to postpone the progress report of the rehabilitation case to 5 September 2022. 2.3 Opinion of the Audit Committee and the Board of Directors related to the suitability to reverse allowance while the lawsuits are not finalized and not recorded any liabilities that may occur from the legal case according to 2.1 and 2.2 respectively From the opinions of the Audit Committee and the Board of Directors, reversal of allowance for both debtors according to 2.1 and 2.2 are in accordance with accounting rules and appropriate following the resolution from the Audit Committee Meeting no.1/2022 and the Board of Directors Meeting no.1/2022 dated 25 February 2022. Once the Company has received payment, the allowance should be adjusted. According to customer in 2.1, no.1, the Company received the transfer of ownership of the assets from auction process at the Legal Execution Department and customer no.2 based on legal opinion. Therefore, the probability that the Company will receive debt repayment is quite high. For the case that the Company has not recorded any contingent liabilities from the lawsuit filed by the debtor under question 2.2 sued the Company. It is confidence that the outcome of the lawsuit will not have negative impact to the Company. This is in accordance with the legal advisor's opinion. In addition, the Company has property collateral value which is higher that loans value. 3. Internal control system of the Company On 11 March 2022, the Securities and Exchange Commission accused the former directors and executives of the Company with a group of 6 persons of fraud and unlawful benefits. Two former directors and executives committed crimes along with 4 persons by jointly let the Company hired All Right House Co.,Ltd. as contractor to build retaining walls and drainage pipes and Chai-ar International Co.,Ltd. as construction supervisor. However, it was found that there was no actual construction according to the contract but the construction cost was already paid. Consequently, the Company had damage loss in the amount of 27.50 million baht. From the above mentioned, preliminary considered that the Company has an issue of internal control which is one of the qualification to maintain as the listed company. Therefore, should clarify as follows: 3.1 Clarify the improvement of the Company's internal control system, please explain the authority to approve the payment, payment procedure, information for consideration and other important action for improving the internal control system under such matters. If it is during development, please identify a timeframe to be completed and report the progress for every quarter following timeline to submit financial statement until the process complete On 11 March 2022, the Securities and Exchange Commission accused the former directors and executives of the Company with a group of 6 persons of fraud and unlawful benefits. Two former directors and executives committed crimes along with 4 persons. From the mentioned issue, the Company would like to clarify that the Company was not damaged in the amount of 27.50 million baht as it was accused since the Company received full amount in return. In addition, the Company would like to clarify that the payment approval authority has been improved. Refer to the resolution of the Board of Directors Meeting no. 9/2021 dated 24 December 2021 to change the authority to approve the purchase of goods and operation expenses on business as usual. The change of approval authority shown in below table: Approval Approval limit before improvement Approval limit after improvement Chief Executive Office Acting Chief Executive Office Not more than 50 million baht Not more than 10 million baht Executive Committee 50 - 300 million baht 10 - 100 million baht Board of Directors More than 300 million baht up More than 100 million baht up 3.2 Opinion of the Audit Committee and the Board of Directors regarding to the sufficiency of internal control system of the Company including follow-up results whether the operation is in accordance with the internal control system or not The Audit Committee has audited the internal control system of various work systems of the Company on a quarterly basis and proposed to the Board of Directors for acknowledgment on a quarterly basis. The Audit Committee also advised how to improve in order to have more efficiency of internal control such as recommend to revise operation manual on a yearly basis. Moreover, from the Audit Committee Meeting no.6/2021 dated 20 December 2021 and the Board of Directors Meeting no. 1/2022 dated 25 February 2022, they was resolved to approve the internal control system and considered sufficient. Please be informed accordingly. Yours Sincerely, Asia Capital Group Public Company Limited ............................................................... (Mr. Anuchai Vitnalakorn) Acting Chief Executive Officer Authorized to sign on behalf of the Company Corporate Secretarial: 02-793-3977 Signature ___________________________ ( Mr. Anuchai Vitnalakorn ) Acting Chief Executive Officer Authorized to sign on behalf of the company ______________________________________________________________________ This announcement was prepared and disseminated by listed company or issuer through the electronic system which is provided for the purpose of dissemination of the information and related documents of listed company or issuer to the Stock Exchange of Thailand only. 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