Liugong Seeks Talks on Forwards-Contract Loss With Citigroup
Feb. 29 (Bloomberg) --Guangxi Liugong Machinery Co Ltd. (000528), a Chinese construction machinery maker, said it wants further negotiation with Citigroup Inc. (C) over a $9 million currency loss from a forwards contract.
The company entered the deal to hedge against appreciation in the Polish zloty to support the 340 million yuan ($54 million) purchase of a unit of Huta Stalowa Wola, it said in a filing to Shenzhen’s stock exchange today.
The contract, signed on April 29, provided for Liugong to buy 138.5 million zloty at the rate of 2.6507 to the dollar, with a settlement date of Oct. 27, according to the statement. After the depreciation of the Polish currency, Liugong on Oct. 21 asked Citigroup sell 138.5 million zloty at 3.2 to the dollar to cancel the contract.
The bank billed Liugong $9 million for the transaction, which the construction maker said it disagreed with. While Liugong made a provision for the loss, it said Citigroup didn’t explain clearly the details of the contract and is seeking further “communication and negotiation.”
“Our position is clear and strong and we look forward to the matter being resolved,” Citigroup said in an e-mailed statement. "The matter in question involves a plain-vanilla product."
Liugong fell 2.3 percent to 14.20 yuan in Shenzhen trading today.
To contact the editor responsible for this story: Neil Denslow at firstname.lastname@example.org