(Yicai Global) Oct. 26 -- Shares of Zhengbang Technology tanked after a court in eastern China kicked off preparations for a reorganization of the troubled pig breeder.

Zhengbang's stock price [SHE: 002157] closed 9.3 percent lower at CNY4.19 (60 US cents). The shares have dropped nearly 60 percent this year.

A court in Nanchang sent a notice about the imminent pre-insolvency reorganization to Zhengbang yesterday. On Oct. 22, the Jiangxi province-based company received another notice about the request of Jinzhou Tianli Grain Trade, a disgruntled supplier, for the court to order a reorganization of the livestock and animal feed company due to unpaid bills.

Pre-insolvency reorganization does not mean the court decides Zhengbang will be restructured or become bankrupt, the firm said. Reorganization means that a firm still has enough value to possibly find an agreement with its creditors and restore its business.

Jinzhou Tianli, a long-term supplier of Zhengbang, used to provide the latter with corn and other commodities, according to public information. Since last year, the two firms have had several transactions. On Oct. 12, Zhengbang refused to pay a CNY9.3 million (USD1.3 million) electronic commercial acceptance bill it issued to Jinzhou Tianli.

Zhengbang lost CNY18.8 billion (USD2.6 billion) last year, causing its net assets to turn negative. It continued to lose money in the first half of this year amid declining hog prices. The firm's debt-to-asset ratio was 102.9 percent as of June 30, according to its financial report. From January to June, the firm logged CNY10.1 billion in revenue, down 62 percent from a year ago, and a tripled net loss of CNY4.3 billion (USD599.2 million).

The company is striving to change its course as on Oct. 21, Zhengbang’s leadership approved the firm's plan to sell some of its subsidiaries to Hubei Province Grain and Oils Group for CNY540 million (USD75.3 million), it said yesterday.

Editor: Emmi Laine, Xiao Yi