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Dongling Group office building. Screenshot from Dongling Group official website

Our reporter Dong Hongyan reports from Beijing

More than 100 member companies, 40 billion yuan in total assets, more than 18,000 group employees... It is hard to believe that Dongling Group, which ranks 205th on the list of "China's Top 500 Enterprises in 2023" with a revenue of 125.7 billion yuan, has now embarked on the road to bankruptcy. Seeing that the building is about to collapse, combined with the previous wanton expansion, Li Heiji, the "top leader" of Dongling Group, has also been compared to "Baoji Xu Jiayin".

Industry experts believe that Dongling Group's bankruptcy was mainly due to over-expansion, market changes and poor management. Dongling Group's bankruptcy, legal cases, total execution amount and legal person height restrictions indicate that the company has debt repayment problems and is unable to repay debts or is insolvent.

However, the bankruptcy reorganization of Dongling Group can help enterprises to reduce debts by introducing investment and reducing debts, and redistribute the interests of the debtor in order to achieve a win-win situation for creditors, debtors, investors, shareholders, etc. In the process of bankruptcy reorganization, whether the reorganization investors can bring good assets and funds is the key to whether the enterprise can "come back to life".

A multi-billion-yuan group enters bankruptcy proceedings

Dongling Group, which has been among the top 500 companies for many years, has suddenly appeared among the bankruptcy applicants. On July 25, 2024, the National Enterprise Bankruptcy and Reorganization Case Information Network announced the case (2024) Shaanxi 03 Bankruptcy Application No. 22, which showed that Dongling Group was filed for bankruptcy reorganization by Shaanxi Nippon Paint Software Co., Ltd., and the person handling it was the Baoji Intermediate People's Court of Shaanxi Province.

The case information (2024) Shaanxi 03 Bankruptcy Application No. 23 published on the website shows that Shaanxi Dongling Materials Co., Ltd., a subsidiary of Dongling Group, was also declared bankrupt by Tongshengchang Commercial Bank in Jintai District, Baoji City.

At present, there has been new progress in the bankruptcy of Dongling Group. On July 30, the National Enterprise Bankruptcy and Reorganization Case Information Network published a notice on the declaration of Dongling Group's claims, showing that Beijing Guantao (Xi'an) Law Firm was designated as the bankruptcy administrator of Dongling Group. Creditors of Dongling Group should declare their claims to the bankruptcy administrator of Dongling Group Co., Ltd. before September 27, 2024.

On August 1, the National Enterprise Bankruptcy and Reorganization Case Information Network released the "Announcement on the Public Selection of Auditing and Appraisal Agencies by the Administrator of the Reorganization Case of Dongling Group Co., Ltd.", which mentioned that the administrator Beijing Guantao (Xi'an) Law Firm decided to publicly select auditing and appraisal agencies within Shaanxi Province to provide professional services for the reorganization of Dongling Group.

The bankruptcy of Dongling Group surprised many people. Many people still have the impression that Dongling Group is a "100 billion yuan private enterprise" and "Top 500". The reporter noticed that the latest update of Dongling Group's WeChat official account was on February 9 this year. On September 20 last year, Dongling Group's WeChat official account also announced that it had been on the list of "Top 500 Chinese Enterprises" for the 19th consecutive time. Dongling Group ranked 205th on the list of "Top 500 Chinese Enterprises" with 125.7 billion yuan. In the list of "Top 500 Chinese Service Enterprises" released simultaneously, Dongling Group ranked 69th.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, told the China Times that the bankruptcy of Dongling Group may damage its brand image and market reputation. Yu Fenghui, an economist and new financial expert, said in an interview with the China Times that as a large private enterprise, the bankruptcy of Dongling Group will have an impact on the local and even national economy, especially affecting the upstream and downstream industrial chains; secondly, 18,000 employees face the risk of unemployment; thirdly, the financial market may also fluctuate, and related financial institutions and investors will be affected; this incident has sounded the alarm for other companies, reminding them to pay attention to risk management and maintain financial stability.

He was good at saving others from danger.

Dongling Group was founded in 1980. It was originally a village-run collective enterprise. In 1994, its operating income exceeded 100 million yuan. In 1996, Dongling Group was established. After years of development, it has many subsidiaries. Its main businesses involve steel and non-ferrous smelting, mineral energy, supply chain services, etc. It is a large-scale zinc smelting private enterprise in western China. Dongling Village, where Dongling Group is located, is also known as the "No. 1 Village in the West". The per capita income of villagers exceeds 100,000 yuan, and the average household assets exceed 5 million yuan. The 40-story office building of Dongling Group, Guojin Center, is known as the tallest building in Baoji.

Dongling Group, which is now in bankruptcy, was once very good at saving others from disaster. From 2000 to 2009, it participated in the restructuring of more than 10 state-owned enterprises on the verge of bankruptcy. By 2017, Dongling Group was still practicing the creed of "helping the world when you are successful". In a restructuring plan of Wuxi Yaohui Real Estate Development Co., Ltd. published by the National Enterprise Bankruptcy and Reorganization Case Information Network, Dongling Group was confirmed as an investor in the restructuring.

In terms of business, many people pointed out that the bankruptcy of Dongling Group was due to its deep connection with real estate. Dongling Group's steel production capacity once exceeded 10 million tons of various steel products, ranking first in China's construction steel sales list. The reporter noted that Dongling Group once publicly stated that in 2022, "51% of the cost of ironmaking came from coke and coal, and the profits of the metallurgical industry chain were swept away by coal mines."

At the same time, real estate is also one of the business directions involved by Dongling Group. Public information shows that in 2018, it also served as a restructuring investor and injected 1.3 billion yuan to revitalize the local Yinhui Center project that had been unfinished for 8 years. In 2020, due to a contract dispute with an elevator supplier, the court froze its account, and later had an economic dispute with a construction company.

At the same time, many people have turned their attention to the "helmsman" of Dongling Group, Li Heiji, the former richest man in Shaanxi. Combined with Dongling Group's past expansion behavior, the reporter noticed that in the Douyin comments, some people compared Li Heiji to "Xu Jiayin of Baoji". However, a private enterprise operator in Baoji's alloy pipe industry publicly stated on the social platform: "Li Heiji is still a role model for Baoji private entrepreneurs."

Before declaring bankruptcy and reorganization, Dongling Group was already embroiled in lawsuits. Tianyancha monitoring data showed that as of August 2, Dongling Group was facing serious legal litigation problems, involving 145 judicial cases, covering sales contract disputes and loan contract disputes, etc. The amount of execution had reached 1.27 billion yuan.

In addition, it is worth noting that on the Alibaba judicial auction website, the shares of Chang'an Bank held by Dongling Group were publicly auctioned by the People's Court of Beilin District, Xi'an. The starting price was 110,754,955.5 yuan, equivalent to 2.17 yuan per share, and the auction started on August 22.

In this regard, Bai Wenxi said that the bankruptcy, judicial cases, total execution amount, and height restrictions on legal persons involved in Dongling Group indicate that the company has debt repayment problems and is unable to repay debts or is insolvent. Yu Fenghui believes that Dongling Group's bankruptcy is mainly due to overexpansion, market changes, and poor management. When the market was good, Dongling Group adopted an aggressive strategy and borrowed a lot to expand its scale, resulting in a high debt ratio; as the economic environment changed, the demand in the steel industry decreased and prices fell, exacerbating financial pressure; coupled with internal management problems, such as wrong decisions and broken capital chains, it eventually led to financial difficulties.

In order to further understand the situation, on August 2, a reporter from the China Times tried to call Dongling Group several times and sent it an interview outline, but no relevant response was received as of press time.

Fu Jian, director of Henan Zejin Law Firm, told the China Times that Dongling Group is going through a bankruptcy reorganization process, the purpose of which is not "liquidation" but "rebirth", helping enterprises to reduce debts by introducing investment and reducing debts, and redistributing the interests of debtors in order to achieve a win-win situation for creditors, debtors, investors, shareholders and other parties. Bai Wenxi pointed out that during the bankruptcy reorganization process, whether the reorganization investors can bring good assets and funds is the key to whether Dongling Group can "come back to life".

Editor-in-charge: Zhang Bei Editor-in-chief: Zhang Yuning