From OSIM's FY11 AR [Note. 12 (a) and (e), p108 and p111/112].....
http://info.sgx.com/listprosp.nsf/07aed3...100178dda/$FILE/OSIM%20International%20Ltd%20-%20Annual%20Report%202011.pdf
the U.S. based retail operation held under 55.56%-owned subsidiary (but treated as a joint-venture accounting-wise) OSIM-Brookstone Holdings Inc (OBH) - historical cost of investment: $145.298m, of which $77.314m already impaired - continued to incur losses, and OSIM's 55.56% share alone of OBH's FY11's losses amounted to $8.7m. But accounting wise, OSIM has not recognized its 55.56% share OBH's recurrent losses - which amounted a cummulative total of $57.064m as at 31Dec11 - by having taken a position for some years now that the Group has no obligation in respect of these losses, by virtue of the following accounting policy:
"When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture." [as described in Note. 2.10, p76]
There is no doubt in my mind that OSIM remains primarily responsible to OBH's business operation, as I don't expect the other 2 partners - Temasek Holdings and JW Childs, both financial investors and original backers to Rom Sim and OSIM - when push comes to shove, can run it, and will let OSIM off the hook on the responsibility of running it. So there is a critical relevant question : Whether OSIM and its 2 partners, Temasek Holdings and JW Childs, can really get away from the responsibility of OBH's total liabilities - OSIM's 55.56% share as at 31Dec11: $346.809m, of which $286.807m comprised non-current liabilities, presumably core senior external debts. We should note that OSIM has already provided additional funding to OBH by way of having invested in its senior preferred notes to the tune of $12.498m. [Note. 14, p116]
Frankly, I am disturbed by OSIM's accounting treatment of its investment in OBH and its seemingly irresponsible stance taken on this difficult business operation held under a majority-owned U.S. subsidiary. IMHO, there remains a real risk that OSIM and its 2 partners, Temasek Holdings and JW Childs, would have little choice but to bail out OBH's lenders and notes/bonds investors, when the existing underlying debts are due for settlement and some of the creditors are not prepared to roll-over their loans which fail to get refinanced. Perhaps this is the reason why Rom Sim and OSIM have chosen not to talk much about OBH's business and financial affairs in the AR's and result announcements. Perhaps this could be an underlying reason for OSIM's $120.0m CB issue in FY11. [Note. 21, p121]
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More info on Brookstone.....
http://www.brookstone.com/
http://www.ir.brookstone.com/common/down...elease.pdf [latest 3Q-FY12 results announcement]