By Liu Yanling, Partner and head of King & Wood’s Bankruptcy, Restructuring & Insolvency Practice
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.
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