Chinese Firm in Contaminated Milk Scam Declared Bankrupt

by Gopalan on  February 15, 2009 at 1:15 PM Corporate News   - G J E 4
 Chinese Firm in Contaminated Milk Scam Declared Bankrupt
The Sanlu Group, the Chinese firm at the heart of the contaminated baby milk scandal, was Thursday declared bankrupt.

The order was issued at the Intermediate People's Court of Shijiazhuang, capital of Hebei province, at the first meeting of the firm's creditors.

Sanlu had failed to repay debts that exceeded its assets, so the firm met the conditions for bankruptcy, the court order said.

The group has 274 creditors, the largest being its wholly owned subsidiary, Sanlu Business and Trade Co. Others include banks, distributors and suppliers.

In September, Sanlu was found to have produced milk products containing melamine that caused the deaths of six babies and made almost 300,000 others ill.

Some 30,000 people, including 10,000 employed directly by Sanlu, are facing unemployment as a result of the firm's liquidation

Beijing Sanyuan Foods Co Ltd, a potential buyer of Sanlu assets, said it did not know the details of the bankruptcy but was watching developments

Sanlu leased its plants to a subsidiary of Beijing Sanyuan Foods Co in December, just days after the Shijiazhuang Intermediate People's Court accepted its bankruptcy petition. Sanlu stopped all production on Sept 12.

In November, the firm announced a plan to sell its assets, including seven factories, to competitor Sanyuan.

On Dec 19, the group borrowed 902 million yuan ($132 million) to pay the medical fees of children sickened by its melamine-tainted baby formula and to compensate the families of the victims, which increased its debt to 1.1 billion yuan.

On Dec 23, the Intermediate People's Court of Shijiazhuang officially accepted its application for bankruptcy.

On the same day, 400 of Sanlu's suppliers and commission agents traveled to Shijiazhuang, to pursue monies owed to them.

Late last month, two men were sentenced to death for their role in the production and sale of tainted milk, while the chairwoman of Sanlu, Tian Wenhua, was given life imprisonment. Several others were also jailed, China Daily reported.

Source: Medindia

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