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Huishan Dairy, whose shares plunged 90 per cent last week in Hong Kong, has confirmed it met with nearly two dozen creditors after failing to make interest payments and revealed it has lost contact with the head of its treasury operations.

In a filing to the Hong Kong stock exchange, Huishan Dairy confirmed it had been unable to make interest payments and, “With the support of the Liaoning Provincial Government… held a meeting with 23 creditor Banks” on March 23. It said the Liaoning government had set out a plan for overdue interest payments to be remedied within two weeks.

The company said chairman and controlling shareholder Yang Kai had learned of the late payments on March 21. That same day, it also lost contact with Ge Kun, an executive director responsible for branding who oversees treasury and cash operations – including expenses – at the company, and had managed relationships with Huishan Dairy’s principle bankers.

The filing said Mr Yang had received a letter from Ms Ge “indicating that the recent work stress had taken a toll on her health, that she would take leave of absence and does not want to be contacted at this time.”

The source of Friday’s sudden sell off however remained unclear. Huishan said Mr Yang was checking with his brokers regarding shares he had pledged via his main Champ Harvest vehicle.

Champ Harvest owns almost 73 per cent of the company’s shares and about two thirds of this, or half the company’s total share count, is currently pledged as collateral for loans or as margin finance for share trading. Mr Yang himself owns nearly 1 per cent of company’s shares directly.

Both sorts of loans tend to have strict limits following share price falls, after which point the borrower must either top up the collateral with more shares, repay some cash, or forfeit some shares. Typically the first of those limits sit about 20 per cent under the share price at which the loan was made.

Huishan Dairy also said in the filing that its shares would remain frozen until “such time as the Board has been able to ascertain an updated position of the Company’s financial position”.

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