A Case Study On The Bankruptcy Reorganization Of Lotus Health

With global economic growth gradually slowing down,domestic enterprises are facing difficulties in operating,with overall profitability levels continuing to decline and some even on the verge of bankruptcy or compulsory delisting.Since the enactment of the new Bankruptcy Law in 2007,many listed companies in China have taken advantage of the newly introduced bankruptcy reorganization system to revive themselves and retain their listing status.The bankruptcy restructuring system helps companies that are at risk of bankruptcy,but still have hope of regeneration,to restructure their debts and business within the legal framework through applications and participation of all parties,so that they can overcome their financial difficulties and continue to operate and create more value.According to Lotus Health’s 2017 and 2018 annual reports,net profit was negative for both years in a row and its creditors applied to the court for restructuring in July 2019.After approval,the restructuring was officially launched.The main issues included employee resettlement,protecting the interests of creditors and shareholders,and addressing capacity aspects.In March 2020,through the restructuring,Lotus Health paid off a large amount of debts,disposed of non-performing assets and optimized resource allocation.Compared to the period before the bankruptcy reorganization,its total assets and net profits have increased significantly,and the company has successfully achieved a new life and the crisis of delisting has been successfully resolved.For listed companies with temporary operational difficulties but still with potential for development,the implementation of bankruptcy reorganization can help them successfully resume their daily production and operation activities and get out of the financial quagmire,thus achieving a win-win situation for all stakeholders,such as society,the public,listed companies,shareholders,creditors,and employees.The thesis selects literature research method,event research method,comparative analysis method and EVA analysis method to analyze and study the case of Lotus Health bankruptcy reorganization from different perspectives.First,this thesis briefly reviews the birth and development of Lotus Health,its organizational structure,pre-reorganization operations and industry competition,and provides an in-depth analysis of the causes of Lotus Health’s financial difficulties.Then,we analyze the impact of the reorganization on the short-term stock price,financial performance,non-financial performance,and economic value added by using the event study,comparative analysis,and EVA analysis.The study found that when a company is in trouble,scientific bankruptcy reorganization can help the company get out of business difficulties,and the company can actively defend the interests of multiple parties to make the reorganization process go smoothly,and the bankruptcy reorganization can also improve the company’s business performance and enhance corporate performance.Finally,the insights from the Lotus Health bankruptcy reorganization case study are presented in the hope of providing some lessons for other companies that are facing similar financial difficulties.