On the morning of 31 March 2020, creditors of Xiwang Group Company Limited (“Xiwang Group”) approved a settlement proposal at the first creditors’ meeting. 89.57% of the creditors who have the right to vote and attended the meeting in favor of the offer. These creditors who accepted the plan owed 86.41% of the total debts. The bond default risk of Xiwang Group arising in 2019 has thus been eliminated through joint efforts from the local government, the creditors, the debtor, and the agencies. This case involved the largest size of assets and debts among judicial settlement cases to date in China, and is also the first ever adoption of judicial settlement procedures to mainly resolve the bond default risk in the country. The creditors’ meeting was held by the People’s Court of Zouping city over the internet during the COVID-19 period.
Established in 1986, conglomerate Xiwang Group engages in a variety of sectors including corn deep processing, special steel, logistics, and international trade. It was awarded Top 500 Agricultural Industrialization Leading Enterprises in 2018, and ranked 379 among China’s top 500 enterprises and 168 among China’s top 500 private enterprises in 2019. It controls three listed companies: Xiwang Foodstuffs Co., Ltd. (000639.SZ), Xiwang Special Steel Co., Ltd. (1266.HK), and Xiwang Property Holdings Company Limited (2088.HK). Due to tightened credit facilities in the whole financial market, severe restrictions on bond issuance and other financing channels of private enterprises, and maturity mismatch in the group’s debts, Xiwang Group may fail to effectively repay a large number of the collectively matured bond principal and interest of RMB 10.4 billion by simply relying on operating cash flow and asset realization. On 21 February, the People’s Court of Zouping city, Shandong accepted Xiwang Group’s settlement application.
As the deputy team leader of Xiwang Group’s administrators, King & Wood Mallesons has, in a short time, completed all related work including declaring and examining the debts, checking the debtors’ assets status, taking part in the coordination with relevant government authorities, organizing the creditors’ meetings, participating in the negotiation and documents drafting for the introduction of strategic investors, and negotiating with all parties over the settlement agreement. Under the instructions and coordination of the court and other departments, the KWM team provided the client with comprehensive, systematical, efficient, and professional legal services with its extensive experience in debt restructuring, securities and litigation. The KWM team has worked together with all parties and conquered numerous difficulties during the outbreak of the virus, and thus gained wide acknowledgement.
The project was led by partners Wang Xin and Gu Wenjiang, and was supported by partners Zhang Yongliang, Xin Zhiqi, Song Yanyan, Wang Jianjian, and Wang Yue.
Wang Xin commented, “I feel honored to participate in the judicial settlement of Xiwang Group. With support from all the parties, we have led the settlement to success by leveraging our extensive experience and capability in debt restructuring, securities and capital markets, and dispute resolution. The success in debt settlement will not only alleviate the burden of the enterprise but also bear a significance in the wide application of the domestic judicial settlement procedures as well as the improvement of the market-oriented risk disposal mechanism of defaulted bonds.”