China Fortune Land Development Co.,Ltd. (CFLD), the first property developer to default in China's recent wave of debt crises, has reignited controversy over its 200 billion yuan restructuring after five years of protracted negotiations.
The company's recent "pre-restructuring" announcement triggered protests from shareholders and creditors. Wang Wei, a director appointed by major shareholder Ping An Insurance, publicly questioned procedural irregularities, while financial institution creditors demanded accountability for missing funds and worsening debt metrics.
On November 21, over half of CFLD's 26 creditor institutions voted to authorize Ping An Asset Management to hire a Big Four accounting firm for special financial due diligence. The creditor committee working group planned to begin preparatory work on November 24.
However, creditors revealed that CFLD has refused the audit request, stating it has "no statutory obligation to cooperate with additional due diligence by the financial creditor committee." The company's ability to advance pre-restructuring now faces significant uncertainty as creditor approval remains pending.
**Procedural Controversy** Since its 2021 default involving over 200 billion yuan in liabilities, CFLD's five-year restructuring has failed to deliver promised results. The latest pre-restructuring petition—filed by construction firm Longcheng Engineering over a 4.17 million yuan debt claim—drew outrage given CFLD's reported 2.4 billion yuan cash reserves.
Notably, CFLD's board claimed "no objection" to pre-restructuring in its announcement, but at least two directors—including Ping An's representative Wang Wei—stated they were unaware of the decision. Wang filed regulatory complaints, alleging the move bypassed required board and shareholder votes.
Legal experts clarify that pre-restructuring isn't codified in China's Bankruptcy Law but involves court assessments of stakeholder interests. Qi Ming, bankruptcy law professor at Jilin University, criticized CFLD's unilateral "no objection" stance as improper for a major listed company requiring thorough evaluation.
**Five Years of Stalled Progress** CFLD's 2021 restructuring plan under Hebei province's oversight promised to cut leverage below 70% within three years through asset sales and debt extensions. However, by Q3 2023, its net assets had plunged to -4.74 billion yuan from 6.3 billion yuan in 2021, with liabilities reaching 96.44% of assets.
While CFLD reports high restructuring agreement rates, creditors accuse the company of favoring select lenders—particularly local state-backed Langfang Bank, its former subsidiary holding 22.58 billion yuan in claims. A controversial 2022 debt-swap proposal requiring new eight-year financing at sub-3.85% rates passed despite 44.62% shareholder opposition.
**Creditors' Audit Authority Challenged** Ping An Asset Management argues the creditor committee has legal grounds for financial inspections under banking regulations, which empower committees to oversee disclosures and hire professional advisors.
The standoff now threatens CFLD's restructuring timeline. Creditors could petition courts to halt pre-restructuring over procedural defects or reject any plan failing to secure majority approval by headcount and two-thirds by claim value.
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