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wuhan contemporary science and technology industry group co., ltd. (hereinafter referred to as contemporary group), once one of the top 500 private enterprises in china and a well-known private enterprise in hubei, has been declared bankrupt and reorganized.

according to an announcement by contemporary group's holding subsidiary renfu pharmaceutical (600079.sh, share price 17.07 yuan, market value 27.863 billion yuan), contemporary group has been involved in 161 lawsuits and arbitrations over debt issues in the past year, with a total amount of about 32.3 billion yuan. can this bankruptcy reorganization help contemporary group break through?

on september 24, a relevant person in charge of contemporary group told the reporter of daily economic news that reorganization is an effective way to resolve risks in a market-oriented and legal way, and there have been a large number of successful cases in recent years. if the wuhan intermediate people's court decides to accept the reorganization application, contemporary group will actively support and cooperate, promote the reorganization-related work, and protect the legitimate rights and interests of all creditors.

the amount of litigation and arbitration involved exceeded 30 billion yuan

renmin pharmaceutical announced on the evening of september 24 that the company received a "notice on the application for reorganization of the company" from its controlling shareholder contemporary group on the same day. contemporary group received a "notice" from the wuhan intermediate people's court on september 24, 2024. the main content was that wuhan credit risk management financing guarantee co., ltd. and tianjin shengzhao law firm applied to the wuhan intermediate people's court for reorganization of contemporary group on the grounds that contemporary group could not repay its due debts and obviously lacked the ability to repay.

contemporary group was founded in 1988. over the past 30 years, the company has been involved in multiple business sectors, including pharmaceutical health, tourism, real estate, film and television culture, and finance. it has also controlled a number of listed companies, including st mingcheng (600136.sh, stock price 1.34 yuan, market value 2.735 billion yuan, namely "contemporary mingcheng") and sante cableway (002159.sz, stock price 13.43 yuan, market value 2.381 billion yuan), and once held shares in financial institutions such as tianfeng securities.

contemporary group has also been a frequent visitor on major lists: it has been selected as one of the top 500 private enterprises in china and the top 500 private manufacturing enterprises in china many times. according to the information on contemporary group's official website, as of september 30, 2020, contemporary group's total assets exceeded 100 billion yuan.

image source: screenshot of contemporary group’s official website

however, contemporary group’s debt crisis broke out in 2022.

renmin pharmaceutical announced on the evening of september 23 that in the past year, contemporary group had 12 overdue or defaulted bonds; in the past year, several rating agencies, including united credit and dagong credit, have downgraded contemporary group's main credit rating to c, and even decided to terminate the credit rating of contemporary group and related bonds. in addition, in the past year, contemporary group has been involved in 161 lawsuits and arbitrations involving debt issues, with a total amount of about 32.33 billion yuan.

image source: screenshot of renmin pharmaceutical’s announcement

contemporary group has also tried to save itself by selling off its assets. by introducing local state-owned assets, contemporary group has sold the controlling stakes of st mingcheng and sante cableway. the latest announcement from renmin pharmaceutical shows that all of contemporary group's 23.70% of the company's shares have been judicially marked and frozen in turn.

can restructuring help contemporary group break out?

according to an announcement made by renmin pharmaceutical on the evening of september 24, as of the date of disclosure of this announcement, the company has not received any document from the wuhan intermediate people's court accepting the applicant's application for the reorganization of contemporary group. there is still significant uncertainty as to whether the applicant's application will be accepted by the court and whether contemporary group will subsequently enter the reorganization process.

on the evening of september 24, shen meng, director of xiangsong capital, said in an interview with the reporter of daily economic news on wechat that after the company is filed for bankruptcy reorganization, the court will make a ruling on it. if the bankruptcy reorganization is approved, the court will appoint an administrator to supervise and lead the reorganization, including convening a creditors' meeting to confirm the registration of claims, formulating a debt restructuring plan, etc. the reorganization plan also needs to be approved by the creditors' meeting.

shen meng said that the time required for the corporate bankruptcy reorganization process is the result of bargaining among all parties and there is no fixed deadline. the debt-equity conversion plan and whether new investors can be introduced are important parts of the reorganization plan and involve the interests of all parties.

pan helin, a well-known economist and member of the information and communications economics expert committee of the ministry of industry and information technology, believes that according to the bankruptcy reorganization process, corporate assets will generally be used to pay taxes and employee wages first, and then the creditors will form a liquidation group to determine the ownership of the claims through creditor declarations. "the most difficult key is the confirmation of claims."

can this restructuring help contemporary group out of its predicament? contemporary group currently still holds shares in some listed companies, including the controlling stake in renmin pharmaceutical, as well as some shares in st mingcheng and sante cableway. among them, renmin pharmaceutical achieved a net profit of 1.111 billion yuan in the first half of this year.

pan helin said that it would be difficult for companies that have applied for bankruptcy reorganization to revive unless someone takes over. "after all, for such a large company, the debts and liabilities are very complicated, and few people dare to take over."

as for its listed companies, pan helin believes that the relevant shares may be auctioned off as assets and liquidated.

renmin pharmaceutical once announced that if the shares held by contemporary group are disposed of in the future, it may lead to changes in the company's equity structure.