A recent court announcement has sent shockwaves through China's real estate sector—China Fortune Land Development (600340), once a top-tier developer with annual sales exceeding 100 billion yuan and dubbed the "Land King of Greater Beijing," now faces "pre-restructuring" triggered by a mere 4.17 million yuan debt claim from an obscure construction firm. Astonishingly, despite reporting 2.4 billion yuan in cash reserves, the company failed to settle this nominal obligation.
On November 16, China Fortune Land disclosed that the Langfang Intermediate People's Court in Hebei accepted a restructuring and pre-restructuring application filed by creditor Longcheng Construction Engineering Co., Ltd. The company stated it had "no objection" to the pre-restructuring.
Intriguingly, the stock surged by the daily 10% limit for two consecutive trading days before the announcement (November 13–14) and again on November 17, signaling market optimism about the pre-restructuring. Yet, creditors and investors are demanding answers: Where did the money go?
Since its 2021 debt restructuring plan, China Fortune Land has ostensibly resolved 87.9% of its 192.7 billion yuan financial debts through paper agreements, but actual liabilities have ballooned. New defaults hit 24.6 billion yuan, cumulative losses surpassed 60 billion yuan over four years, and net assets turned negative (-4.7 billion yuan).
**Suspicions Around Pre-Restructuring** Pre-restructuring, though not a formal judicial process, offers a transitional framework. Creditors, however, allege procedural irregularities: 1. **Unauthorized Consent**: The "no objection" stance reportedly bypassed required approvals from the debt committee, board, and shareholders. 2. **Opacity in Management**: The court filing revealed the pre-restructuring application dated October 29, yet the company delayed disclosure until November 16, skipping board review. The composition of the court-appointed "Judicial Restructuring and Liquidation Group" remains undisclosed. 3. **Solvency Paradox**: With 2.4 billion yuan in cash, why couldn’t the company repay a 4.17 million yuan debt? Creditors suspect mismanagement or hidden agendas.
**Trading Irregularities** Prior to the announcement, institutional and quantitative traders aggressively bought shares, fueling speculation about insider leaks. For instance, Ningbo-based Yongxing Securities’ Hangzhou branch purchased 10.2 million yuan on November 14, while Guotai Junan’s Shanghai branch bought over 8 million yuan.
**The Debt Spiral** Despite a 2021 restructuring plan targeting 70% debt-to-asset ratio within three years, China Fortune Land’s liabilities worsened: - **Cash Drain**: Monetary reserves plummeted 80% from 14.4 billion yuan to 3 billion yuan, with only 5% of promised 2023 cash repayments delivered. - **Uncollected Receivables**: 49.4 billion yuan in government-related receivables saw just 7 billion yuan recovered since 2021. - **Asset Transfer Controversy**: In June 2025, the company offloaded subsidiaries to Langfang Asset Management for 2 yuan, extinguishing 22.6 billion yuan in bank debt—a move critics call "draining core assets."
**Governance Questions** Creditors challenge the roles of the government-led debt resolution task force and founder Wang Wenxue, questioning whether backroom deals influenced asset transfers. With local governments as both mediators and major debtors, conflicts of interest loom.
**What’s Next?** Pre-restructuring audits must conclude within four months. Creditors could block the process if procedural flaws persist or if the final plan fails to secure majority approval by headcount and two-thirds by debt value. Small creditors, demanding transparency and fair treatment, may reject haircuts.
As self-rescue proves unviable, a "second restructuring" emerges as a last hope. For China Fortune Land, ensuring creditor rights, disclosing fund flows, and operating under legal sunlight are imperative to break the deadlock.
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