The Fall of D'Long

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......