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EXCEL - IDEA: XBRL DOCUMENT - China Precision Steel, Inc.Financial_Report.xls
10-Q - QUARTERLY REPORT - China Precision Steel, Inc.form10q.htm
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v2.4.0.6
Short-Term Loans
3 Months Ended
Sep. 30, 2012
Debt Disclosure [Abstract]  
Short-Term Loans

11. Short-Term Loans

 

Short-term loans consisted of the following:

 

    September 30, 2012     June 30, 2012  
Loan dated June 29, 2011, due July 31, 2012, with an interest rate at 115% of the standard market rate set by the People’s Bank of China (“PBOC”) (6.9% at September 30, 2012) per annum (Notes 6 and 8)     7,980,347       7,891,943  
Bank loan dated June 29, 2011, due July 31, 2012 with an interest rate at 115% of the standard market rate set by PBOC (6.9% at September 30, 2012) per annum (Notes 6, 8 and 10)     19,571,342       19,354,534  
    $ 27,551,689     $ 27,246,477  

 

The above bank loans outstanding at September 30, 2012 are Renminbi (“RMB”) loans, carry an interest rate of 1.15 times the standard market rate set by the PBOC, and are secured by inventories, land use rights, buildings and plant and machinery, and guaranteed by PSHL and our former Chairman, Mr. Wo Hing Li. In addition, pursuant to a bank loan agreement entered into between the Company and Raiffeisen Zentralbank Osterreich AG (“RZB”), Mr. Li undertakes to maintain a shareholding percentage in the Company of not less than 33.4% unless otherwise agreed to with RZB.

 

The weighted-average interest rate on short-term loans at September 30, 2012 and 2011 was 6.9% and 7.54%, respectively.Principal and interest under the short-term loans totaling $27,551,689 with RZB were to be repaid in full on July 31, 2012, but the Company has defaulted on this repayment obligation. The Company is currently in discussions with RZB regarding the restructuring of the loans for repayment but has not yet agreed on specific terms. Any restructuring will be subject to approval by RZB’s governing bodies, and to the Company’s ability to meet certain conditions and requirements that may be imposed by the Bank. RZB also has the right to take possession of the collateral granted in connection with their respective loan agreements, which action would have a material adverse impact on the Company.

 

As part of the ongoing discussions with RZB to potentially restructure our short-term loans, we are putting in place a series of measures to cut costs and improve overall profitability including expanding our customer base to increase total demand, strategizing our product mix to re-focus on our competitive advantage and niche capabilities including the ultra-thin low-carbon and high strength high-carbon products, streamlining production and reducing the number of workers in response to lower demand, hiring professionals and technicians to improve our production management and increase quality control, and continuing to carry out research and development (“R&D”) to improve profitability of existing products and launch new high value-add products.