Debt Restructuring -- Second Life for a Distressed Company
Stellar Megaunion Corporation ("SMC") was in serious debt, as it could barely repay its liabilities. New World China Land ("NWCL"), which was seeking an opportunity to go public, proposed to acquire SMC as a shell company which has no assets, but is publicly listed. To achieve this goal, NWCL conducted several rounds of negotiations with SMC's creditors to settle SMC's debts and clear the roadblocks for the acquisition. However, the parties were unable to make much progress in the negotiations due to the large number of SMC's creditors involved. As SMC needed to solve its debt crisis as soon as possible and its negotiations with NWCL were deadlocked, the company decided to reorganize to completely release itself from the heavy debt burdens in a short period time.
SMC's Reorganization
A. Reorganization initiated by SMC's creditors
As SMC failed to repay it debts due, a third party creditor petitioned the proper Intermediate People's Court (the "Court") to reorganize SMC. The Court accepted the petition on March 11, 2008 ([2008] Yusanzhongbozi No.1).
B. Confirmation of Creditors' Rights
According to the proposed reorganization plan the administrator of SMC (the "Administrator") submitted to the Court and the first SMC creditors' meeting, 70 creditors filed claims and the total value of confirmed claims was nearly RMB 2.5 billion. [continue reading to find out the outcome]
Liu Yanling, Partner and head of King & Wood's Restructuring & Insolvency group.
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New York: Current Trends Lead to Overseas Expansion
In the first half of 2008, overseas investment of Chinese companies has more than doubled from last year. This year, Chinese outbound investment has already reached 16 billion euros (nearly $23 billion) according to Bloomberg.
Correspondingly, we have seen an increasing number of our domestic Chinese clients invest abroad for both market seeking and resource seeking opportunities. We expect this trend to accelerate in the coming years as outbound rules continue to be relaxed and domestic companies shift their strategies to compete globally.
This trend, coupled with close working relationships with a significant number of American companies and law firms have lead King & Wood to establish its New York office opening September 9th, 2008. As a firm with an extensive client list in the banking industry, our location on Madison Avenue will serve as serve as a local presence for many of our American clients and also provide international support for our clients at home. Since 2001, King & Wood has made a series of international moves such as San Francisco, Hong Kong, Tokyo and most recently with our Sydney Strategic Alliance at the end of 2007.
For years we have seen U.S. and European law firms expand into China. As the global clout of Chinese companies grows, we will see continue to see Chinese law firms expand with them.
New Trend of Global Cross-Border M&A and Strategic Investment Wave
2008 is destined to be an extraordinary year for global cross-border M&A. King & Wood, as a leading law firm deeply rooted in this activity in China, has noticed the following trends in the second half of 2007 and the first half of 2008...
By Wang Junfeng, Partner
Edward Jing, King & Wood’s Securities Group
Continue Reading...Why No Poison Pill in China?
Last month, Mr. Martin Lipton, of Wachtell, Lipton, Rosen & Katz, honored King & Wood with a speech on the implications of the “poison pill” in legal practice. Mr. Lipton is noted for his innovative "rights plan", a series of defensive measures taken by the board of a target company in a hostile takeover. The “rights plan” is meant to ward off hostile offers that substantially underestimate the value of the target's shares. The rights plan was later referred to as the "poison pill" by Wall Street bankers whose attempts at hostile takeover below fair value were frequently frustrated by the "rights plan."
Mr. Lipton's speech inspired me to ponder the question of how defensive measures work in China's corporate governance. I then googled the word "poison pill" and "company" in Chinese, but found no instances of companies utilizing the poison pill within China. So why is there no poison pill in China?
By Li Wenbo King & Wood’s International Trade Group
