<PAGE>
                                                                   Exhibit 10.12

[HSBC LOGO]


Corporate & Institutional Banking - International Division L9

Ref:

CONFIDENTIAL

Novel Denim (HK) Ltd
I/F Novel Industrial Building
850-870 Lai Chi Kok Road
Cheung Sha Wan
Kowloon

                                                                   27 March 2002

Attention: Mr Peter Leung / Mr Vincent Chan

Dear Sirs

BANKING FACILITIES
A/C NO 580-046001

With reference to our recent discussion, we are pleased to advise that we have
reviewed your banking facilities and offer a renewal within the following
limits which will be made available on the specific terms and conditions
outlined below and subject to the satisfactory completion of the security below.
These facilities are also subject to review at any time and, in any event by 15
March 2003, and subject to our overriding right of suspension, withdrawal and
repayment on demand, including the right to call for cash cover on demand for
prospective and contingent liabilities.

                                                                           Limit
                                                                           -----
REVOLVING LIBOR LOAN FACILITIES                                  USD10,000,000.-

Interest on the loan will continue to be charged at 0.75% over 1, 2 or 3 months
LIBOR (London Interbank Money Market Offer Rate) payable at the end of each
interest period to the debit of your current account. Interest shall be
calculated on actual days elapsed in a year of 360 days for USD loan.

The applicable LIBOR will be that quoted by us at or about 11:00 a.m. on the
date of drawdown / rollover.

General conditions for the utilisation of the LIBOR Loan facilities:-

a)  2 working days advance notice of drawdown / rollover is to be given to us
    for LIBOR facilities respectively. Once a quotation has been given and
    accepted by you, we will thereupon be bound to make, and you will thereupon
    be bound to accept, any advance on the terms so agreed.

b)  Each drawdown / rollover to be for periods of 1, 2 or 3 months.

c)  Each initial drawdown must be for USD300,000.- and thereafter in multiples
    of USD100,000.-.

                                                                           .../2

The Hongkong and Shanghai Banking Corporation Limited
Hong Kong Main Office: 1 Queen's Road Central, Hong Kong
Tel: 2822 1111 Fax:
Telex: 73205 HSBC HX Telegrams: Hongbank Hongkong                   Page ___/___

<PAGE>
Novel Denim (HK) Ltd                                               27 March 2002
                                       -2-

d)  At the end of an interest period the amount of the drawing may be rolled
    over either in one or two or more amounts (providing such amounts are in
    multiples of USD 100,000.- with a minimum drawdown of USD300,000.-) for
    further periods of 1, 2 or 3 months.

e)  With our prior approval, which will not be withheld, provided we are
    satisfied that the funds utilised are generated from your internal
    resources, out of cash flow rather than from external re-financing during an
    interest period any amount of outstanding loan may, with 48 hours advance
    notice to us, be repaid subject to the usual charges (i.e. the differential
    between the return we would have received had such amount run to maturity
    and the return we are able to obtain by the placing of the funds repaid for
    the remainder of the period in the market).

f)  We reserve the right to renegotiate the LIBOR interest spreads should any
    event occur which changes the basis on which LIBOR interest margins are
    presently calculated.

Please note that Loans Section in our Mongkok District Commercial Banking Centre
is responsible for the administration of LIBOR facilities. For rate quotations
and other day to day administrative matters, please contact our Mrs Johanna Lam
on telephone number 2390-1575.

                                                                           Limit
COMBINED IMPORT/EXPORT FACILITIES                                HKD50,000,000.-
Documentary Credit to your suppliers and Loan Facilities
in either HK dollars or foreign currency (from time to time
published by the Bank on the board rates) for up to 90 days,
less any usance/credit periods granted by your suppliers
and/or D/P bills purchased.

Within which                                                   (HKD50,000,000.-)
Goods under your control and/or Trust Receipt
Receipts and/or D/A bills purchased up to 90 days.

Interest on your HK Dollar Import Loans will continue to be charged on a daily
basis at our best lending rate (currently 5.125% per annum, but subject to
fluctuation at our discretion) and payable monthly in arrears to the debit of
your current account.

Interest on Foreign Currency Import Loans and Export financed bills will
continue to be charged on a daily basis at the prevailing interest rates,
published by us as Trade Finance Rates, subject to fluctuation at our discretion
and payable monthly in arrears to the debit of your current account.

We, may at our sole and absolute discretion, refuse to follow drawings under the
facilities if the drawee is considered by us to be unacceptable and/or if the
transaction in question does not meet our operational requirements in respect of
these facilities.

                                                                           .../3

<PAGE>
Novel Denim (HK) Ltd                                               27 March 2002
                                       -3-


We also confirm the following concessionary rates will continue applicable to
your facilities; -

DC Opening Commission and Commission in Lieu of Exchange

<TABLE>
<S>                          <C>    <C>
On 1st USD50,000             --      1/4%
USD50,001- USD100,000        --     1/16%
Balance in excess            --     1/32%
</TABLE>

                                                                           Limit
OVERDRAFT                                                        HKD30,000,000.-
Interest on the overdraft facility will be charged on daily
balances at our best lending rate, (currently 5.125% per
annum, but subject to fluctuation at our discretion) and
payable monthly in arrears to the debit of your current account.


A commitment fee of 0.25% per annum will continue to be charged daily on the
undrawn balance of your overdraft facility and will be payable monthly in
arrears to the debit of your current account.

                                                                           Limit
FOREIGN EXCHANGE LINE                                           HKD100,000,000.-
Total Forward Contract Limits


Unless by prior arrangement with us, options entered into under this facility
are not to exceed twelve months in duration.

Terms and Condition
Contracts may only be entered into to cover trade-related exchange exposure
incurred in the normal course of business.

Foreign Exchange facilities remain subject to our overriding right to call for
cash cover on demand if in the Bank's view a negative foreign exchange position
requires such cover. Further, the Bank may, after having discussed the position
with yourselves, close out any or all of your outstanding foreign exchange
contracts and demand settlement of the balance due.

Foreign exchange contracts continue to be governed by the conditions appearing
on the reverse of the standard contract form. These contract forms should be
checked upon receipt and the copy signed and returned to the Bank to confrm your
acceptance.

                                                                           .../4


<PAGE>
Novel Denim (HK) Ltd                                               27 March 2002

                                       -4-

                                                                           Limit
COMPANY CARD FACILITY                                               HKD200,000.-
The terms and conditions governing the Company Card Facility
are detailed in our HSBC Company Credit Card Application Forms
duly signed by you.

SECURITY
As security, we continue to hold the following securities:

1.  A Corporate Guarantee in our favour for HKD100,000,000.- from Novel Denim
    Holdings Ltd, together with a certified copy of a Board Resolution dated
    29June2001.

2.  A Corporate Guarantee in our favour for USD3,000,000.- from Novel Denim
    Holdings Ltd, together with a certified copy of a Board Resolution dated
    26September2001.

3.  A Corporate Guarantee in our favour for USD7,000,000.- from Novel Denim
    Holdings Ltd, together with a certified copy of a Board Resolution dated
    7March2002.

4.  ISDA Master Agreement & IDS Schedule together with minutes of meeting both
    dated 29 June 2002.

ACCRUAL OF INTEREST AND OTHER SUMS
Please note that interest and other sums expressed to be chargeable or payable
on a periodic basis will nonetheless accrue from day to day and amounts so
accrued may be demanded at any time.

DISCLOSURE OF INFORMATION
Unless expressed in writing from you to the contrary, we may provide any
information relating to any of your accounts with us and any facilities we may
provide to you from time to time or their conduct or any other information
concerning your relationship with us to any other company or office which at the
relevant time belongs to or is part of the HSBC Group.

SECTION 83 OF THE BANKING ORDINANCE
Please note that Section 83 of the Banking Ordinance has imposed on us as a bank
certain limitations on advances to persons related to our directors or
employees. In acknowledging this Facility Letter you should advise us whether
you are in any way related to any of our directors or employees within the
meaning of Section 83 and in the absence of such advice we will assume that you
are not so related. We would also ask, should you become so related subsequent
to acknowledging this Facility Letter, that you immediately advise us in
writing.

                                                                           .../5
<PAGE>
Novel Denim (HK) Ltd                                               27 March 2002

                                      -5-


ACCEPTANCE

Please arrange for the authorised signatories of YOUR COMPANY AND THE JOINT
USERS, in accordance with the terms of the mandates given to the Bank, to sign
and return to us before 17April2002 the duplicate copy of this letter to signify
your understanding and acceptance of the terms and conditions under which these
facilities are granted. As agreed, an arrangement fee of HKD 135,000.- will be
charged to the debit of your current account upon receipt of your acceptance to
these facilities.


We are pleased to be of continued assistance.


Yours faithfully                                For and on behalf of
                                                NOVEL DENIM (HK) LIMITED
/s/ Roddy K W Lau                               /s/ Lester Ma
---------------------------                     --------------------------------
Roddy K W Lau                                   Authorized Signature(s)
Global Relationship Manager

Encl