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.
Continue Reading...
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.
Revolution in the Foreign Exchange Control System
——A Brief Analysis on the New Administrative Rules on Foreign Exchanges
Background
On August 5, 2008, the Premier of the PRC State Council, Mr. Wen Jiabao, issued the State Council Order No. 532, which promulgates the newly revised “Administrative Rules of the People’s Republic of China on Foreign Exchanges” (hereinafter referred to as the “New Rules”). This document came into force upon its promulgation, and to a large extent changes the rules of the old foreign exchange supervision system. This tremendous change in the regulatory system is for the purpose of accommodating the rapid development of
By King & Wood’s Banking Group
Continue Reading...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...Movables Mortgage Registration Measures
By Li Jinnan, Partner and Pan Ye, associate.
The Measures also address issues relating to floating charge registrations. Please click here for more details. (PDF)
ISDA: New Master Agreement Promotes Prosperity For Derivatives
In the final quarter of 2007, the National Association of Financial Market Institutional Investors (“NAFMII”) was authorized by the People's Bank of China to release a standardized Master Agreement and supplements (“Master Agreement”) to serve as uniform documentation of inter-bank market participants in financial derivatives transactions. For those familiar with the International Swaps and Derivates Association Master Agreement (“ISDA Agreement”), its influence is evident in the newly adopted Master Agreement. Similar to the ISDA Agreement, the Master Agreement addresses an extremely wide variety of transactions, including most if not all derivatives allowed by Chinese law.
There are three very prominent features of the Master Agreement. First, it adopts the “single agreement” scheme. The single agreement scheme combines all the necessary schedules, confirmations, and CSAs into the one Master Agreement. Second, the concept of “netting” is utilized. Parties can choose netting not just within one transaction, but across different transactions if specified. In the event of early termination close-out netting is even allowed, minimizing loss upon credit failure. Third, close-out amounts are narrowly tailored to the Chinese market. An example of such a Chinese-specific provision is that tax–related aspects are largely ignored since it is assumed that the Master Agreement will be used for domestic dealings.
The Master Agreement is not without its flaws, but they are far outweighed by the progress that it represents. Issues such as the validity of netting in bankruptcy situations and uncertainties regarding alternatives for documentation are comparatively minor and can be settled by practice. There is little doubt that this significant advancement will notably promote prosperity within the domestic financial derivatives market.
By Liu Zhigang, Partner and Lv Yinghao, associate
Water Market & China: a New Direction
On March 13, 2008, the General Office of the State Council promulgated the Opinions of the General Office of the State Council on Implementing Some Policies and Measures for Accelerating the Development of the Utility Sector. (No.11 [2008] of the General Office of the State Council) In this opinion, it is clearly stated that “The market-oriented reform of municipal public utilities may be promoted continuously and stably. The operations of water, heat and gas supply, public transportation, sewage disposal and waste disposal, etc. may be entrusted to private enterprises.” This article ended the long-lasting controversy of “whether
By Li Qiang, Partner
