On February 8, 2012, the Company entered into a Debt Settlement Agreement with Melco Leisure and Entertainment Group Limited ("Melco" or "MLE") for the settlement of a loan in the principal of US$12 million made by Melco to the Company (the "MCR Loan") and a loan in the principal of US$11 million (the "MCRI Loan", and together with the MCR Loan, the "Melco Loans" or "MLE Loan") made by Melco to Mountain China Resorts Investment Limited ("MCRI"), the Company's Cayman subsidiary, both in 2008. On May 29, 2012, the Company and Melco entered into Amended and Restated Debt Settlement Agreement to clarify details of the loan settlement mechanism and procedures to implement the settlement of the Melco Loans. As of the reporting date, the Company has not implemented the transactions contemplated under the Amended and Restated Debt Settlement Agreement at this time. The Melco Loans have matured on 31 March 2013, so that the entire Melco Loans now become immediately due and payable.
Non-Brokered Private Placement
On February 22, 2012, the Company announced that it has closed the non-brokered private placement of 105,700,000 common shares (the "Shares") initiated in September 16, 2011, priced at $0.18 per Share for gross proceeds of $19 million (the "Offering"). The proceeds from the Offering will be used for general working capital and for the repayment of certain debentures. The Shares are subject to a TSX Venture Exchange hold period of four months and one day from closing of the Offering. On March 9, 2012, the Shares were issued to the corresponding shareholders.
On March 2, 2012, Yabuli Resort missed the second principal repayment in the amount of $4.79 million (RMB 30 million) under its $39.93 million (RMB 250 million) loan agreement with the China Construction Bank ("Construction Bank"). On March 31, 2013 the Company defaulted on its third principal payment of 6.34 million (RMB 40 million). According to the Loan Agreement between Yabuli and Construction Bank, Construction Bank has the right to accelerate Yabuli's obligation to repay the entire unpaid principal plus interest immediately and to take legal actions to enforce on the security. The collaterals associated with the loan agreement are made up of the Company's land use rights and property and equipment with a carrying value of approximately $68.64 million as at December 31, 2012. During the Company's initial negotiation with the bank, the bank required the Company to repay the interest. However, the Company has stopped the interest payment starting from February 2012. As a result, negotiations have ceased and the bank has indicated their intention to take possession of the pledged assets if the loan principal and interest are not repaid in full. On December 31, 2012 the principal and interest owing was $39,315. As of the reporting date that Company has not received any formal claim.
MCR is the premier developer of four season destination ski resorts in China. MCR is transforming existing China ski properties into world-class, four seasons luxury mountain resorts with excellent real estate investment opportunities for discerning buyers. In February 2009, the Company's Sun Mountain Yabuli Resort was awarded Best Resort Makeover in Asia by TIME Magazine. Yabuli is also the permanent home of the China Entrepreneur's Forum the leading and most influential community of China's most distinguished and successful entrepreneurs and business leaders with over 5,000 members from across a variety of key industries.
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