Poisoned Chinese milk company declared bankrupt
A Chinese court declared bankrupt the company at the centre of a scandal over tainted milk that was blamed for killing six children and making nearly 300,000 more ill.
New Zealand’s Fronterra Group, part owner in the Chinese venture, said last night that a court in Shijiazhuang, in China’s Hebei province, issued a bankruptcy order against Sanlu Group in response to a petition from a creditor.
“Sanlu will now be managed by a court-appointed receiver who will assume responsibility for an orderly sale of the company’s assets and payment of creditors,” Fonterra chief executive Andrew Ferrier said.
“There will now be a formal process to ensure that creditors are dealt with in accordance with Chinese law.”
Sanlu was one of 22 Chinese dairy companies found to have added high levels of the industrial chemical melamine to its milk products, leading to the deaths of six babies and causing 294,000 others to suffer urinary problems.
Fonterra, a New Zealand farmer-owned co-operative, owns 43% of Sanlu.
At least a dozen individual lawsuits have been filed against state-owned Sanlu, but they are caught in a legal limbo as courts have neither accepted nor refused the cases – a sign of the scandal’s political sensitivity.
The scandal has been met with public anger in China, particularly among parents who feel the government breached their trust after their children were made ill from drinking infant formula authorities had certified as safe.
The government has promised free medical treatment to the children who fell ill, plus unspecified compensation to them and families of the dead.
The health ministry said earlier this month that some Chinese dairy companies would probably have to pay for a compensation plan, the details of which have not been released.
Fonterra was responsible for alerting Chinese authorities to the tainted milk scandal in August, and by late September had slashed the value of its investment in the Chinese dairy group by £92.7m (€98m) to an estimated £41.4m (€43.7m).
Mr Ferrier said Fonterra had since “elected to write down the full value of our investment in Sanlu”.
The receiver would have six months to conclude the sale process, he said.
“This bankruptcy order is not a surprise to us,” Ferrier said. “We were aware that Sanlu was in a very difficult situation and faced mounting debts as a result of the melamine contamination crisis.”
Fonterra chairman Henry van der Heyden said the melamine contamination was “a criminal event”, but added that Fonterra remained “committed to China”.
Fonterra, which controls more than 95% of New Zealand’s milk supply, is the country’s largest multinational business, its second-biggest foreign currency earner and accounts for more than 24% of the nation’s exports.
