King Wan Corporation

[Yoyo]

More details on the guarantees:

The right to recovery of the amount due from Dalian is subordinated to the right of a bank for loans given to Dalian. The Company together with another shareholder of Dalian, have provided joint and several corporate guarantees of $60,480,615 for bank loans given to Dalian which is included in Note 36 to the financial statements.

So to summaries for DSC, loaned out $18mil, write off $12mil.  $6mil in BS.  Further there is a joint corporate guaranteed of $60mil.  KW share is 36.6% so about $22mil of liabilities if DSC totally kaboom?  So pretty much cancelled out benefits from KTIS gains?

 
Hi GPD, believe you have computed based on KW share of 36.6% on $60m = $22m.

DEFINITION of 'Joint And Several Liability '
When multiple parties can be held liable for the same event or act and be responsible for all restitution required. In cases of joint and several liability, a person who was harmed or wronged by several parties could be awarded damages and collect from any one, several, or all of the liable parties. The liable parties would be required to pay the entire damage award, which could be split among multiple parties or could come from just one party. Each party would be liable for part of the damages, or up to as much as all of the damages.

http://www.investopedia.com/terms/j/join...bility.asp

Copromisors are liable “jointly” if all of them have promised the entire performance which is the subject of the contract. The effect of a joint obligation is that each joint promisor is liable for the whole performance jointly assumed. It has been said that persons who bind themselves jointly for the performance of one entire duty become sureties for one another for performance of the contract.

A “joint and several” contract is a contract with each promisor and a joint contract with all, so that parties having a joint and several obligation are bound jointly as one party, and also severally as separate parties at the same time.

But making an obligation joint and several doesn’t affect what can be recovered. Regarding joint obligations, the Restatement says, “A and B owe $100 to C jointly, and C obtains a judgment against A and B for $100. Execution may be levied wholly on the property of either A or B, or partially on the property of each.”
 
http://www.adamsdrafting.com/exploring-j...d-several/

Bank loan of $60,480,615 made to Dalian based on joint and several corporate guarantees provided by
(a) The Company together with (b) another shareholder of Dalian.  In the unfortunate event that the loan are not recovered by the bank, the bank would probably go after the one [(a) or (b)] with the deeper/deepest pocket.  Thus the maximum exposure by (a) or (b) on the guarantee obligation is the full loan amount of $60.5m.

PS:  Joint and several obligation, though commonly used, has wide implication.  Please treat with care.