Independent directors at China Milk Products turned the heat on the dairy and semen group's managers on Friday after it defaulted on the repayment of about $150m of bonds, sparking questions from Singapore's stock exchange.

The Singapore-listed group's non-executive directors said they were "extremely concerned over the state of affairs" at China Milk, which said it did not could not pay investors redeeming a batch of convertible bonds because it had insufficient funds outside China, its operational base.

The group also pushed back the release its third-quarter results beyond a stock exchange deadline of February 15, and announced the resignation of the chairman of its audit committee, Sum Yee Loong, a Deloitte tax accountancy veteran and graduate of the UK's Bath University.

Mr Sum's departure, which China Milk blamed on "work commitments", was effective as of February 4, four days after the group's chief financial officer, Martin Choi, stepped down to "pursue other career interests".

Turn for the worse 

China Milk said on January 5 that, while it was awaiting clearance from China for the release of the $170.56m needed to repay bondholders, including interest, it believed the delay was "administrative and procedural" and faced "no legal obstacle".

However, according to Friday's statement, managers could not now, in the eyes of independent directors, "give an unequivocal confirmation as to whether, when and how" China Milk would make the repayment.

"The earlier impressions given to the board was that the company is in a position to [repay bondholders] save for some procedural matters," the company's statement, released under the name of chief executive Liu Hai Long, said.

While Mr Liu had assured the company that China Milk's finance department was "functioning as usual", the reconstituted audit committee has demanded time to "fully understand" the group's financial affairs before clearing the quarterly results.

The company urged that the suspension on trading in its shares, since Tuesday, be continued "for the time being".

Stock exchange demand

Separately, the Singapore stock exchange, SGX, said it took a "very serious view" of the default, and demanded China Milk "immediately" make a further statement.

This should clarify whether China Milk had the funds in China to repay the bond, the actions is was taking to obtain the money, and whether the company was able to continue as a going concern.