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Zhong Lun Assists 25 Nanjing Construction Group Companies with Their Restructuring
Zhong Lun Assists 25 Nanjing Construction Group Companies with Their Restructuring
Release time：2022-05-27
Voice Announcements
On April 14, 2022, the Nanjing Intermediate People’s Court (“Court") ruled to approve a plan for merger and restructuring of 25 companies, including Nanjing Construction Industry Group Co., Ltd., Nanjing Construction Group Co., Ltd., Nanjing East Road and Bridge Engineering Co., Ltd. and Nanjing Jiasheng Construction Group Co., Ltd. (collectively, “Nanjing Construction") and terminate their substantive merger and reorganization process, marking a breakthrough for resolving their debt risks that had been dragging on for more than three years. This is China’s first bankruptcy case where out-of-court debt restructuring, pre-reorganization and judicial reorganization procedures achieved satisfactory results and lifted large construction companies out of their debt distress. The case is also the first typical case in Nanjing in which pre-reorganization procedures were applied. Therefore, it serves as a fine example of how out-of-court restructuring efforts can be combined with in-court restructuring procedures to reduce procedural costs and improve the efficiency of the bankruptcy regime.
As consultant, Zhong Lun worked hard to push forward the out-of-court debt restructuring efforts and achieved desired results. After pre-reorganization and reorganization proceedings started, the firm acted as one of the joint administrators appointed by the Court to play a leading role in designing and drafting the reorganization plan, communicating with creditors for the roadshow, facilitating voting, auditing claims and handling lawsuits relating to the bankruptcy.
The project was led by partner Jianhui Tang, and the team included partners Qiang Li and Haitao Wang, non-equity partners Ke Ding, Zhiqiang Xiao and Juan Tian, along with associates Rongjie Peng, Yun Gao, Yinbo Fei, Jie Guo, Yue Zhang, Yushu Qin, Xiaoqun Liu, Hongqi Luo, Siyuan Li and Zi Wang.
Nanjing Construction, founded in 2002, is a large private construction group in Jiangsu Province. The group started with construction engineering and expanded its footprint to infrastructure construction, urban development and operation, health tourism and other fields, with several top qualifications in the construction industry. The debt crisis occurred at the end of 2018, making a drastic impact over the production and operation of Nanjing Construction and the regional financial and social stability. Audit confirmed that the debt amounted to RMB 130 billion, involving more than 100 financial institutions across the country, showing distinctive cross-market, cross-regional and cross-institutional characteristics, as well as 2,000 natural person creditors. As the case entailed complex interests and demands of a host of stakeholders and a large number of knotty issues, attracting wide attention, it would put the interests of creditors and social stability on the line if not handled properly.
Under the guidance of the Court and with the support of creditors, strategic investors and other related parties, Zhong Lun innovatively introduced investors who provided high-quality equity assets as additional debt repayment resources to increase the repayment rate. The firm also assisted Nanjing Construction to form a new operation platform that integrated their advantages and focuses on developing construction business, which is where most of their strengths lies, thus rejuvenating their ability to generate funds on their own. With the firm’s help, Nanjing Construction established an innovative mechanism to compensate for overseas assets of the beneficial owner to further secure the interests of creditors, and set up a service trust to collect all debt repayment resources and enable creditors to hold trust shares to control all debt repayment assets and enjoy future value-added income. Finally, on the basis of balancing the interests of all parties, Along the line, a complete reorganization plan was formed which managed to strike a balance between the interests of all stakeholders. The plan was passed by the creditors by vote and approved by the Court, bringing about a win-win situation for all parties involved.
As one of the earliest Chinese law firms in the field of corporate debt restructuring and bankruptcy reorganization, Zhong Lun has accumulated rich experience in debt risk resolution of large private enterprises and large groups and formed unique business acumen and competitive advantages in the sector. Equipped with comprehensive capabilities to solve problems by innovatively tapping expertise in various practice areas, the firm provides all-round, full-process debt risk resolution legal services that run the gamut from out-of-court debt restructuring to pre-restructuring and reorganization.
