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Instant noodle maker files for bankruptcy protection

By Wang Bo (China Daily)
Updated: 2008-11-20 13:45

Beijing-based instant noodle maker Wugudaochang has sought bankruptcy protection to continue operations, according to a local court.

"The company is required to work out a debt restructuring plan soon, and creditors could declare their losses to the court within 40 days," an anonymous judge with Beijing Fangshan People's Court was quoted by the Beijing News as saying.

"The plan will have to be approved subsequently by the creditors. If it fails to get the required approval, the court may then declare the company bankrupt," the judge said.

Wugudaochang has liabilities of over 600 million yuan. China's bankruptcy laws allow a company on the brink of bankruptcy to hold off creditors and continue operation if it can work out a way to restructure its finances.

A court source told China Daily that the company's survival largely depends on the feasibility of the reorganization plan.

If the plan is in line with creditors' interests, they may approve the plan, the source said.

He said the company is actively looking for strategic investors to recapitalize its business without specifying who they were.

Wugudaochang is the first instant noodle maker in China which had advocated the healthy "non-fried" concept. The products, launched in 2005, got instant customer recognition and helped it rival other major brands like Tongyi and Kangshifu.

Excessive expansion and higher prices of raw materials, however, took a toll as its debts started mounting.

The company could not repay many of its bank loans and also owed huge amounts to suppliers.

All of this led to the company eventually seeking bankruptcy protection.

In a statement submitted to the court, the company said its financial burdens were largely due to higher raw material and advertising costs.

The company had earlier borrowed 10 million yuan from China Construction Bank's Fangshan branch to ensure liquidity.

But it failed to repay the amount when the loan matured in April this year.

"Until now, we have accepted more than 100 lawsuits from Wugudaochang creditors," the source with Fangshan People's Court said.

Analysts still believe that the company could tide over the current crisis.

"With the existing facilities and the popularity of its brand, it is possible for the company to get its products back to the market," said Chen Shuwei, an analyst with Beijing Orient Agribusiness Consultancy, according to Beijing News.