But experts believe the restructuring will be beneficial to both shareholders and creditors, and will be a new way for non-performing assets handlers to dispose of assets.

These are firms that specialize in turning debts into new funds for new developments.

Zhengzhou Baiwen had 51 million domestic A shares listed on the Shanghai stock market in 1996. Since then it has made huge losses every year. Official media Xinhua News Agency said the firm had assets of less than 600 million yuan (US$72.48 million) and bank debts of about 2.5 billion yuan (US$301.2 million) by the end of June this year.

Its largest creditor, China Cinda Asset Management Corporation, which took over the 2 billion yuan (US$241 million) of creditor's rights in Baiwen from China Construction Bank, had filed a suit at local court in Zhengzhou in March to liquidate Baiwen.

As no listed company in China has been liquidated or delisted so far, some experts hoped Baiwen would be the first case and be beneficial for the healthy development of China's stock market in the long run.

But Baiwen itself was expecting a restructuring of its assets to bail it out, and it finally got it.

A press conference about its restructuring was held on Saturday afternoon by China Cinda, the Zhengzhou city government and the electrical appliance retailer Shandong Sanlian Group, which is to take over the majority of Baiwen's debts.

According to the agreed plan, Shandong Sanlian will purchase around 1.5 billion yuan (US$180.7 million) of Baiwen's debts owed to China Cinda for 300 million yuan (US$36 million). Baiwen shareholders will still keep their shares and those who do not want their shares anymore can sell them to Sanlian at a price decided by the shareholders' general assembly.

China Cinda's remaining 576 million yuan (US$69.4 million) creditor's rights in Baiwen will be sold to the parent company of Baiwen and be guaranteed by the Zhengzhou government.

"Cinda expects to recover another 300 million yuan (US$36 million) from the latter sale and recoup 600 million yuan (US$72 million) in total," said Gao Guanjiang, director of Cinda's equity right management department.

"That means Cinda will get back 28.9 percent of the non-performing assets," he added.

Insiders said if Baiwen is liquidated, Cinda will retrieve no more than 100 million yuan (US$12 million) worth of assets.

Meanwhile, Shandong Sanlian, one of the biggest enterprises in Shandong Province, will get a "shell" to list on the stock market, said Sanlian Chairman Zhang Jisheng.

This means that Sanlian cannot issue its own shares, but through the purchase can sell Baiwen shares.

This method of raising cash can reduce the time and trouble for a listing and help Sanlian expand in markets outside Shandong Province.

After the take-over, Sanlian will pump money into Baiwen to keep it alive and try to make the enterprise grow fast and steady, said Zhang.

"This restructuring plan can best protect shareholders' and creditors' interest and avoid a negative impact on China's stock market," said Cinda's Gao.

However, the possibility that Baiwen will still be liquidated does exist as the restructuring plan is still subject to the approval of the shareholders' assembly which meets on December 31, he said.

(China Daily 12/04/2000)