A Chinese dairy firm at the heart of a scandal over melamine-tainted powdered milk has been declared bankrupt, a New Zealand partner with major shares in the company said on December 24. New Zealand-based Fonterra said a court in northern China's Shijiazhuang city had issued a bankruptcy order against Sanlu "in response to a petition from a creditor."
A spokesperson for Sanlu confirmed to China's official Xinhua news agency later on December 24 that the court had accepted the bankruptcy petition. Fonterra, which owns 43 per cent of Sanlu, said the Chinese firm will be managed by a court-appointed receiver who plans to oversee the sale of its assets and payment of creditors within six months.
"This bankruptcy order is not a surprise to us. We were aware that Sanlu was in a very difficult situation and faced mounting debts as a result of the melamine contamination crisis," Fonterra CEO Andrew Ferrier said in a statement on the company's website.
"We have been aware of this commercial reality and that was the reason we elected to write down the full value of our investment in Sanlu," Ferrier said.
"There will now be a formal process to ensure that creditors are dealt with in accordance with Chinese law," he said. Chinese financial daily The First quoted a Sanlu employee as saying it had received a bankruptcy order several days ago but that the company was still exploring other possibilities for disposal of its assets.
Xinhua said the Shijiazhuang city government had reportedly set up a restructuring team to negotiate the sale of Sanlu's assets to other large Chinese firms. Earlier Chinese media reports said the government might order the sale of Sanlu, which employs some 10,000 people in Shijiazhuang, to other major dairy producers.
Baby milk powder contaminated with melamine led to the death of at least six infants in China earlier this year and is believed to have sickened more than 294,000 others, according to the Chinese health ministry. Most of those treated said they had consumed baby milk powder made by Sanlu.
Government officials said Sanlu knew about the contamination of milk powder with melamine since March but didn't order a national recall of the powder until September.
Health inspectors also found illegal levels of melamine in some liquid milk and yoghurt sold by three other leading dairy producers - Yili, Mengniu and Bright Dairy. Melamine is used as a binding agent and coating for particle, fibre and laminated board in furniture. It is also used to make fertilizer.