On 8 August 2017, the second creditors meeting and capital contributors meeting for the reorganization of Dongbei Special Steel Group Co., Ltd. (hereinafter “Dongbei Special Steel Group”) and its subsidiaries was held, and the draft of the reorganization plan was passed at the meeting by a wide margin. On 11 August, the reorganization plan was approved by the intermediate people's Court of Dalian.As the only professional service provider among bankruptcy trustees, King & Wood Mallesons (KWM) fulfilled its responsibilities and assisted Dongbei Special Steel Group with its successful restructuring.
Dongbei Special Steel Group is primarily engaged in the manufacturing and sales of high-tech, high-end and high-value-added special steel materials. As a key supplier of special steel materials, Dongbei Special Steel Group supplies numerous special steel materials for China’s self-developed artificial satellite, intercontinental missile, long-range rocket, new fighter, nuclear-powered submarine, and heavy tank, and also for the fast-developing Shenzhou series spaceship, Chang’e Lunar Exploration project, China-made airliner, new generation destroyer, and aircraft carrier. In recent years, under an evolving economic environment and influenced by internal factors, such as relocation, heavy borrowing, insufficient capacity release, and irrational assets and liabilities structure, Dongbei Special Steel Group has defaulted on bond repayment consecutively since March 2016, throwing the company into severe operational and debt crises. On 10 October 2016, Dalian Intermediate People's Court accepted the reorganization application from its creditors, and Dongbei Special Steel Group and its two subsidiaries entered the bankruptcy restructuring process. On 10 July 2017, the bankruptcy trustees and the company submitted a draft reorganization plan to the Court. On 8 August, at the second creditors meeting and capital contributors meeting convened by the Court, creditors and capital contributors were grouped to vote on the draft plan with each group passing the plan by a wide margin. The draft reorganization plan was passed at the creditors meeting in accordance with law, and the trustees applied to the Court for approval later. On 11 August, the reorganization plan was approved by the Court.
The reorganization of Dongbei Special Steel Group attracted intensive attention from all circles of the society. Under the principles of market-oriented and the rule of law, the reorganization fully guarantees creditors’ rights to know, participate and supervise, and will maximize the profits for creditors on one hand, and get debtors out of trouble on the other. Under the reorganization plan, over RMB 70 billion debts is properly dealt with through debt reserve, one-time cash settlement, debt-to-equity swap, etc. In the reorganization, investors were selected based on the will of relevant parties and through transparent, fair and just procedures under market mechanism, which was widely recognized by the creditors. Dongbei Special Steel Group’s reorganization is featured by innovative attempt in, among others, introduction of investors, integrated restructuring of its affiliated companies, designing of the liquidation plan, and debt-to-equity swap, offering guidance for bankruptcy restructuring practice, legislative perfection and theoretical research.
The project was led by KWM partners Liu Yanling and Yang Li from Beijing office, supported by many other partners and associates from the KWM’s Restructuring & Insolvency team.
The reorganization of Dongbei Special Steel Group is the latest success of KWM’s Restructuring & Insolvency team among many other high-profile cases they represented in recent years. In June 2016, the Supreme People's Court released the Top 10 Typical Cases concerning bankruptcy and the promotion of supply-side structural reform, six of which were represented by KWM.
