The Fall of D'Long




Case Details Case Introduction 1 Case Introduction 2 Case Excerpts

Abstract

The case discusses the rise and fall of China based D'Long Group (D'Long). The group was started by Tang brothers in Xinjiang as a small facility to develop and print photographs. D'Long grew by acquiring companies involved in different businesses ranging from tomato paste to automobile parts. Since there were limited options available to obtain finance for its rapidly growing businesses in China, D'Long began acquiring shares in the state-owned enterprises. D'Long then procured bank loans by using the shares of its listed companies as collateral. The group went on to establish itself in financial services business by establishing NBFCs and acquiring stake in City Commercial Banks.

D'Long obtained more hg funds by issuing right shares and providing debt guarantees. Funds obtained from different sources like trust companies and finance companies were used for buying its own shares, in order to increase the share price. The investigations by China Banking Regulatory Commission in 2003 placed D'Long among high-risk companies, after which banks refused to extend any more loans to it. In April 2004, D'Long announced that it was facing major financial problems due to adverse macro-economic conditions and fall in share prices of its listed companies. This announcement led to further fall in share prices and demand from the banks for higher collateral. D'Long failed to meet its financial and business obligations and failed to repay its depositors, which led to its collapse......

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Issues

The case is structured to achieve the following teaching objectives:

  • Examine the reasons for initial success of D'Long
  • Critically evaluate the factors that led to the collapse of D'Long
  • ¬†Analyze the methods used by private companies to obtain funds for financing business in China

  • ¬†Gain insights in the functioning of banking industry and capital markets in China

Contents
Introduction
Background Note
Financing Business Expansion
The Problems
The Collapse
The Aftermath
Exhibits

Keywords

D'Long Group, Stock Scandal, Bankruptcy, Financial Problems, Chinese Banking Industry, Financing Private Businesses , Transparency, Collateral Securities, Debt Guarantees, Diversification, Business Expansion, Corporate Governance Structure, Chinese Securities Regulatory Commission, Capital Market Financing in China, Asset Management

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