Zhengzhou Baiwen to restructure
Updated at 8.03pm: Zhengzhou Baiwen, a debt-ridden state-owned department store in the capital of Henan province, will begin to restructure according to a plan approved yesterday to avoid an embarrassing bankruptcy, Xinhua News Agency reported on Friday.
The move ends weeks of speculation that the store could be the first mainland firm to withdraw from the stock market and the first public company to declare bankruptcy in the mainland. It may also relieve small investors who would otherwise get nothing from the company's bankruptcy, Xinhua reported, citing Chinese stock market analysts.
The company, which listed on the Shanghai A share stock market in 1996, has lost 1.5 billion yuan (HK$1.4 billion) and owes 2.5 billion yuan in bank loans. It has just 600 million yuan in assets, said Xinhua.
The Sanlian Group, a Jinan-based company with diverse interests, will take over the store and up to a 50 per cent of stake in the listed branch of the company, according to the reorganisation plan.
Zhengzhou Baiwen's news has dealt a heavy blow to a mainland stock market that has been inundated with under-performing companies. But governments in China are reluctant to let even the worst performing companies withdraw from the exchange or go bankrupt, according to the analysts.
Restructuring began when the Construction Bank of China, Zhengzhou Baiwen's biggest creditor, ordered its assets management subsidiary Cinda to negotiate debts with the Zhengzhou city government, the store's biggest shareholder.
Cinda also appealed twice to the China Securities Regulatory Commission to let Zhengzhou Baiwen go bankrupt, but met with strong resistance from local authorities. A court in Zhengzhou rejected Cinda's application to force the store to go bankrupt, Xinhua said.
Under the compromised restructuring plan, local government's holdings will be phased out from the store, and loan liabilities will be divided three ways: the parent company of Zhengzhou Baiwen, Sanlian Group and Cinda.
Sanlian will pump 300 million yuan into the company, and Cinda will waive part of the loan liabilities, Xinhua said.
