The Securities and Exchange Commission (SEC) is asking the debt-ridden Energy Earth Plc (EARTH) to submit a document concerning contingent liabilities worth 26 billion baht within five business days, and is also demanding a special audit of the coal trader's debt obligations.
It wants the audit to find out how much debt the company is carrying, to be done by one of the big four auditors. The outcome must be submitted to the SEC and disclosed to the public through the Stock Exchange of Thailand (SET) information system within 30 days, the SEC said.
"Failure to comply with the SEC's order or concealing information will cause EARTH's executives and board of directors to face both criminal and civil sanctions," the securities watchdog said.
Energy Earth said earlier this month -- in reply to the SET demand for an explanation for a sharp increase in liabilities from its previous disclosure -- that its liabilities of 46.5 billion outpaced assets of 31.8 billion because it made a 26-billion-baht provision for contingent liabilities after the first quarter financial statement. With higher liabilities than assets, Energy Earth is qualified to file a business rehabilitation petition to the Central Bankruptcy Court.
Apart from its contingent liabilities, set aside after suppliers' lawsuits against the company, Energy Earth says it also has 11 billion baht debt owed to financial institutions, 5.5 billion stemming from bond issues, 2.4 billion from bills of exchange (B/Es), 938 million from trade accounts payable and other payables, and 1.21 billion for short-term loans offered through its subsidiaries.
"The SEC considers the amount of increasing debt could cause substantial effects on EARTH's financial position while the source, existence and status of such debt were still not clear, which might affect a wide range of shareholder benefits or investor decisions," the SEC said. It added that the securities watchdog might summon people from the company to provide information or turn in documents.
The SEC on June 23 demanded Energy Earth arrange a special audit on transactions of advance payments for purchases of goods, and payments for the right to purchase goods, within 30 days. The company has not submitted the results of the special audit, nor completely and clearly clarified the information as required, it said.
The SET said SP (suspension) and NP (notice pending) signs will remain on Energy Earth's securities until the company submits the special audit results and complete clarification to the SET and SEC as required.
Energy Earth has fallen into financial trouble after it failed to redeem two lots of B/Es worth a combined 90 million baht due in early June, saying the company's cash had been squeezed after its bank creditor halted its overdraft line of credit.
Its financial problems snowballed when a raft of its B/Es defaulted, triggering cross-default debentures worth 5.5 billion baht, compounded with its failure to seek fresh sources of funding from financial institutions.
Energy Earth this week stunned the market by suing Thanachart Bank (TBank) on claims that the bank had disclosed the company's confidential information to Krungthai Bank (KTB) and caused KTB to suspend credit facilities to the company.
It is demanding 60 billion baht in financial damages.
TBank denies the claim, saying the bank has high standards for keeping customer's information confidential and will counter with criminal and civil lawsuits against Energy Earth.
The Bank of Thailand has asked TBank to provide information about Energy Earth's legal action against the bank.
