(Yicai Global) Nov. 17 -- China Huishan Dairy Holdings Co. [HKG:6863] plans to apply for provision liquidation, it said in a filing on Nov. 16, noting that as of March 31 this year, its subsidiaries "could have been" CNY10.5 billion (USD1.58 billion) in debt.

"The board has instructed the Cayman legal advisors of the company to prepare the relevant documentation to place the company into provisional liquidation," the statement read. "Such steps will take into account, as far as possible, options available to the company to preserve the assets of the group. Given that most of its assets are held through its subsidiaries in China, any debt restructuring of those assets and liabilities would be subject to Chinese law."

Huishan's share price plummeted in March this year and trading halted, three months after short-seller Muddy Waters Research LLC exposed irregularities in the dairy firm's financial reports.

The company has total loan balances amounting to around CNY7.8 billion. It owes CNY2 billion to Industrial and Commercial Bank of China Ltd. [SHA:601398;HKG:1398], HKD2.14 billion (USD274.3 million) to Ping An Bank Co. [SHE:000001], CNY1.35 billion to Jilin Jiutai Rural Commercial Bank Co. [HKG:6122], CNY700 million to China Minsheng Banking Corp. Ltd. [SHA:600016;HKG:1988], CNY700 million to China Zheshang Bank Co. [HKG:2016], CNY680 million to Shanghai Pudong Development Bank Co. [SHA:600000] and CNY110 million and HKD150 million to Agricultural Bank of China Ltd. [SHA:601288;HKG:1288].

In August this year, media reports suggested Shenzhen Fuhaiyintao Asset Management Co., the financial advisor Huishan employed, had submitted a debt restructuring program to the chairman of the company's creditor committee. The general outline of the plan was for the company to use internal and external assets to offset debts and have creditors set up a new company to transfer equity to management.

Creditors initially opposed the proposal, but things seem to have taken a turn this month. The advisor in charge of debt restructuring has entered an agreement with more than half of the company's Chinese creditors and gathered support for the debt restructuring plan, said Yang Kai, Huishan's director and controlling shareholder.