Zhejiang Glass, the first privately owned mainland company to join the Hong Kong stock market, may be plunged into bankruptcy and sold off to state-owned enterprises under plans drawn up by a local government and state-backed banks.
According to people familiar with the glassmaker's accounts, the company has 7 billion yuan (HK$ 8.3 billion) of bank debt compared to 4 billion yuan of assets.
The bankruptcy and sale plan drawn up by the Shaoxing authority in Zhejiang province along with China Mingsheng Bank and Huaxia Bank, has alarmed the IFC - the World Bank's private investment arm and the glassmaker's biggest independent shareholder.
Zhejiang Glass, which employs more than 5,000 people in the province, does not have any state shareholders. A senior official said: 'The reality is that local governments are wielding their influence. Shareholders are being sidelined and ignored.'
IFC, which so far has not been invited to take part in the talks being led by the Shaoxing government, is exposed to up to US$84 million of losses if the glassmaker goes bankrupt.
'IFC is trying to find a fair and transparent solution to the current situation that saves a good business and employment, while respecting the rights of creditors and shareholders,' a spokesman said. IFC has a 28 per cent stake in the company worth US$34 million and lent it US$50 million in May 2006.