2024.03.26
Recently, the reorganization plan for the substantive consolidation and reorganization of Yanggu Xiangguang Copper Co., Ltd. (“Xiangguang Copper”) and 18 other companies (the “19 Companies”) was approved by the People’s Court of Yanggu County in Shandong Province. JunHe, as the bankruptcy administrator, made significant progress in helping the 19 Companies resolve their debt risks. Ms. Lian Jing acted as the administrator’s principal.
The 19 Companies all belong to GMK Holdings Group Co., Ltd. (“GMK Group”) ,a large international group of companies engaged in real businesses. It has two major businesses, Xiangguang Copper and the green food business led by Shandong Fengxiang. Xiangguang Copper was established in 2005 and is a large, world-class copper smelting company. It was one of the first enterprises reviewed by NDRC to meet the Access Conditions for the Copper Smelting Industry. It was the first large-scale copper smelting enterprise in China to adopt “double flash” technology and it has independent intellectual property rights in the Xiangguang Suspended Intelligent Copper Smelting Process. In recent years, Xiangguang Copper was affected by market fluctuations, changes in the financing environment and other factors, and in March 2022 it fell into a severe debt crisis and operational difficulties.
On May 10, 2022, the People’s Court of Yanggu County rendered a ruling on the bankruptcy reorganization of Xiangguang Copper, and designated JunHe as the administrator following a public selection process. On July 14, 2022, upon the application by the administrator and after a public hearing and legal proceedings, the court ruled that the 19 affiliated Companies implement a substantive consolidation and bankruptcy reorganization. After the investors were publicly selected, the administrator negotiated and signed the reorganization and investment agreement and drafted the reorganization plan. This was reviewed at the second creditors’ meeting on May 6, 2023. With the approval of the reorganization plan by the investors and creditors, the People’s Court of Yanggu County ruled on September 19, 2023, to approve the reorganization plan of the 19 Companies and to terminate the reorganization proceedings.
The substantive consolidation and reorganization of the 19 Companies involved assets of more than RMB 20 billion and total liabilities of more than RMB 60 billion. The assets involved non-ferrous metals (including smelters, copper processing, and biomass power generation), food (listed companies), energy and trade businesses. As well as interest-bearing financial and operational liabilities, there were also other complex liabilities such as financial notes, private-fundraising liabilities, and employee-fundraising liabilities. Creditors were distributed overseas and across the country, and included banks, finance companies, microfinance companies and other financial institutions. It involved more than 20 financial products such as interbank lending, working capital loans, and letters of credit. The risks associated with the real economy and quasi-financial institutions coexisted, constituting a significant regional debt risk.
JunHe as the administrator played an active role in the reorganization. Adhering to principles of “marketization and legalization”, JunHe respected the market rules and complied with all legal requirements in the risk disposal process. JunHe’s team assisted in the reorganization of the enterprise group through multiple channels and means. They introduced entrusted management to ensure uninterrupted operations during the reorganization, separately disposed of the unlisted shares of the Hong Kong-listed companies engaged in the food business during the reorganization proceedings so as to maximize the value of bankruptcy property and developed multiple debt repayment plans to provide more options for the different creditors. JunHe applied a substantive consolidation and reorganization regime to protect the legitimate rights and interests of the creditors, combined the government’s and the court’s efforts in the reorganization and recruited reorganization investors in a market-oriented manner to ensure the creditors’ decision-making rights. They also applied a service trust in the bankruptcy and reorganization proceedings to improve the debt recovery rate for the creditors. The administrator was highly recognized for its work by the major financial institutions and other relevant departments of the municipal and county governments and received six letters of commendation and one banner from them.
This project was led and undertook by Ms. LIAN, Jing.
