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.

The Chinese TV manufacturer has sued its business partner in the United States for failing to pay US$467.5 million in bills in mid-December in Los Angeles, California.

Changhong is open to "all kinds of possibilities and alternatives" to settle the dispute, an earlier Reuters report quoted Charles Wang, an attorney with Cadwalader, Wichersham & Taft LLP who represents the company, as saying.

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

"The purchase of Apex could very possibly be the only option for Changhong to solve its bad debt problem with Apex," 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 down Changhong's losses as it is unlikely to collect the whole debts owed by Apex, he added.

"And taking over the US distributor will provide Changhong direct access to the US market, and is good for its future expansion in the international market," Chen said.

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

Changhong started co-operating in 2001 with Apex, a leading low-end TV and DVD supplier in the US market.

The company generated some US$373 million sales in 2003 to big consumer electronics retailers like Circuit City, Best Buy and Wal-Mart in the United States.

Changhong was one of Apex's main suppliers in recent years, exporting televisions from China under the Apex brand.

According to Changhong's complaint to the Los Angeles court, the US firm paid for its initial orders but soon fell behind in its payment obligations.

The Chinese company is demanding immediate payment and threatening to foreclose on Apex's US properties and assets.

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

Apex's chairman David Ji was detained in October in Shenzhen over alleged fraud related to bank bills.

However, Apex officials claimed yesterday that its chairman was forced to sign over assets to Changhong, and it paid the Chinese TV maker more than US$340 million in 2003, the Reuters report said.

Changhong, which listed on the Shanghai Stock Exchange, announced on December 28, that it expected a huge loss for 2004 due to uncovered debts from Apex and the failure of short-term investment.

Based on an evaluation of Apex's current assets, only US$150 million would be recovered out of the total debts, it said. And it plans to set aside US$310 million to write off the bad debts.

The company posted a 46.86 per cent year-on-year fall in net profits for the first nine months of last year to 82.79 million yuan (US$10 million) and total assets stood at 20.89 billion yuan (US$2.5 billion), down 2.2 per cent from the end of 2003.

Changhong's shares lost about a quarter of their value since the statement, closing yesterday at 3.67 yuan (44 US cents), slightly up by 0.82 per cent or 0.03 yuan.

Changhong is trying every legal means to clear the debts and collect the money, the company said.

But the company still reported a debt-to-asset ratio of under 50 per cent and stated that it is operating normally.

Source: China Daily