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Changhong Sues Apex in US Court

Sichuan Changhong Electric Appliance Co Ltd, one of China's top three television makers, started settlement talks this week with US consumer electronics company Apex Digital Inc, according to media reports.

Changhong filed a suit against its business partner in mid-December in Los Angeles, California for failing to pay US$467.5 million in bills. Apex's chairman David Ji was detained in October in Shenzhen over alleged fraud related to bank bills.

The Chinese manufacturer is open to "all kinds of possibilities and alternatives" to settle the dispute, an earlier Reuters report quoted Charles Wang, an attorney with their legal representatives Cadwalader, Wickersham & Taft LLP, as saying.

A report in Tuesday's edition of 21st Century Business Herald said the TV manufacturer plans to buy Apex, its largest overseas customer and distributor.

"The purchase of Apex could very possibly be the only option for Changhong to solve its bad debt problem with them," Chen Yuanwang, an analyst from China Securities, said yesterday.

"The US$467.5 million debt appears sufficient to cover the purchase," Chen said.

It is possibly the best way to cut Changhong's losses as it is unlikely to collect all of the debts owed, he added. "And taking over the distributor will give them direct access to the US market, good for its future expansion in the international market."

Officials from the TV maker could not be reached yesterday for comment.

They started cooperating with Apex, a leading low-end TV and DVD supplier in the US market, in 2001, becoming their main supplier in recent years.

According to Changhong's complaint to the US court, Apex paid for its initial orders but soon fell behind. The Chinese company is demanding immediate payment and threatening to foreclose on Apex's US properties and assets.

The distributor agreed to a repayment plan in October only to miss its first two repayments, totaling US$150 million, driving Changhong to take legal action, the complaint said.

However, it has been reported that Apex yesterday claimed its chairman was coerced under threat of physical harm to sign over assets, which Changhong denied categorically.

Changhong, which is listed on the Shanghai Stock Exchange, announced on December 28 that it expected a huge loss for 2004 due to Apex's unpaid debts and the failure of short-term investments.

(China Daily January 6, 2005)

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