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Central firm in tainted milk crisis files for bankruptcy

Latest update : 2008-12-25

China's Sanlu Group, the company at the centre of an international crisis involving milk tainted with melamine, has filed for bankruptcy. The contaminated milk and milk products sickened almost 300,000 children and resulted in six deaths.

AFP - The Chinese firm at the centre of a nationwide tainted milk crisis that sickened nearly 300,000 children and killed six has filed for bankruptcy, a judge said on Wednesday.
   
A bankruptcy judge in the city of Shijiazhuang, where the milk manufacturer Sanlu Group is based, told AFP the court accepted the bankruptcy filing for consideration last week.
   
"We accepted the bankruptcy application... on December 18," said the judge, who would give only his surname, Li, as is common with officials in China.
   
Sanlu was the first dairy manufacturer found to be selling milk products tainted with the chemical melamine, a scandal first exposed in September and which later implicated many Chinese firms.
   
Melamine is normally used in making plastics and has other industrial uses, but it emerged that the chemical was routinely mixed into watered-down Chinese milk and dairy products to give the impression of higher protein content.
   
Fonterra, a New Zealand dairy firm that was a major shareholder in Sanlu, said the court had already declared the firm bankrupt.
   
The world's biggest international trader of dairy products, Fonterra held a 43 percent stake in Sanlu, one of 22 dairy companies identified as selling toxic products.
   
"We were aware that Sanlu was in a very difficult situation and faced mounting debts as a result of the melamine contamination crisis," Fonterra chief executive Andrew Ferrier said in Wellington.
   
He said Sanlu would be managed by a court-appointed receiver who would sell off the company's assets and repay creditors over the next six months.
   
Fonterra has written off its 114 million US dollar investment in Sanlu.
   
However, the bankruptcy judge said the company's status had not yet been decided.
   
"There is a long way to go in approving (Sanlu's) bankruptcy under bankruptcy laws," the judge said, noting that authorities face a time-consuming probe of company debts and assets to determine whether it is indeed insolvent.
   
"If so, we will announce the bankruptcy. If not, we will reject the application," he said.
   
Earlier this month China dramatically raised the official tally of children sickened by dairy products laced with the industrial chemical melamine to 294,000, and said six babies may have died from drinking toxic milk.
   
Melamine can cause kidney stones if taken in excessive levels, and babies who were fed tainted milk powder suffered the worst.
   
Once the news broke in September, Chinese dairy products around the world were recalled or banned after they were found to be tainted.
 

Date created : 2008-12-25

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