A court in China has frozen the bank deposits of two units of Parkson Retail Group (PRGL), the Hong-Kong-listed subsidiary of Parkson Holdings in Malaysia, because of a dispute over a loan agreement.

In a notice to the Stock Exchange of Hong Kong, PRGL says its indirect wholly owned subsidiaries Changshou Parkson Retail Development (Parkson Development) and Parkson Investment Holdings (Parkson Investment) are involved in a litigation. They are named as defendants along with four other parties, including PRGL’s landlord Changshou Hang Lung Properties, which owns the premises where Parkson has a department store in Hang Lung Centre in Changshou, Jiangsu province. The store occupies the first floor underground and five floors above ground.

PRGL, which is 54.67 per cent owned by Parkson Holdings, says the Intermediate People’s Court of Suzhou, Jiangsu province, has issued a civil judgment relating to a dispute over a loan agreement. China Construction Bank’s Changshou branch is the plaintiff.

Tenancy transfer

On July 10, 2009, Parkson Investment, Parkson Development and the landlord entered into an agreement to transfer the tenancy under the original tenancy agreement signed in December 2008, with Parkson Development replacing Parkson Investment as tenant.

Parkson Development received a notice of assistance in enforcement last week issued by the court, as well as the civil judgment dated June 7.

The court has agreed to China Construction Bank’s request for “an order on preservation of properties”, that is, that a total 212.41 million yuan (US$31.8 million) of the defendants’ bank deposits, or an equivalent value of assets, be frozen.

PRGL says the defendants can apply for a review of the judgment, which would not be suspended in the interim.

A legal adviser appointed by the company says that based on the information available to date, there is no reasonable ground to explain why Parkson Development and Parkson Investment are involved in the suit.