Milk scandal firm Sanlu declared bankrupt

By Cai Ke (China Daily)
Updated: 2009-02-13 07:50

The Sanlu Group, the company 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.

Also during the court hearing, the firm's credit manager announced a credit registration and audit report, and an asset management and price variation scheme was also passed.

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 demise.

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

A view of the tainted Sanlu Group headquarters in Shijiazhuang,capital of Hebei province. [China Daily/Wu Changqing]

"When the auction notice for Sanlu is published, our board of directors will meet to decide whether to bid and discuss related details," Wang Qian, secretary of the board of Sanyuan, said.

The company is confident it will buy some of Sanlu's assets, and will re-finance its sister company in Hebei in a bid to resume production in some factories, a Sanyuan group insider said in an interview with Cnstock.com.

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.