(Yicai Global) Aug. 29 -- Negotiations over the debt restructuring plan of China Huishan Dairy Holdings Co. [HK:6368] are still at an impasse. Noah Wealth Management became one of the dairy company's creditors after its subsidiary, Gopher Asset Management, purchased shares in the firm. Some 189 qualified retail investors submitted a written protest to Huishan Dairy and the creditors' committee against the preliminary debt restructuring plan, Caixin Magazine reported today.

"We believe the [company's] principal has significant moral defects, and his credit has gone bust," the protest said. "We urge the government to investigate the matter and prosecute the responsible parties for their legal liability. We strongly object and will never accept any reorganization plan if Yang Kai remains as the actual controller of Huishan Dairy."

The debt crisis at the company was triggered by the disappearance of Ge Kun, its chief financial official, on March 23. The government of Liaoning province convened an urgent meeting of more than 70 creditors, requiring them to act in lockstep and not to withdraw any existing loans or postpone payment of loans that have already been granted. Gopher filed an application with a court in Shanghai to freeze assets belonging to Huishan Dairy and its subsidiaries, Yang and his wife, and the court imposed a freeze on their assets worth USD81.5 million (CNY546 million) in total.

The firm engaged Wu Jiesi's Fuhai Yintao Asset Management as its advisor for the debt restructuring in early June, and came up with a highly controversial plan -- injecting all of Yang's assets in China and abroad into a new Chinese company after a complete reorganization, and offering Yang a 15-percent stake as an incentive.

More than CNY10 billion worth of funds have gone missing, and many creditors have lost faith in Yang -- the one-man management 'team.' The missing dough includes CNY2.433 billion in bank deposits, CNY8.2 billion paid out of company accounts and CNY3 billion in interest-bearing debt, Caixin reported.

Many banks including Bank of China, which is heading the creditors' committee, have also opposed the debt restructuring plan, claiming that Yang cannot explain the funds' disappearance, so he does not deserve such a generous equity incentive.

Another reason creditors are opposed to the plan is that most of the banks only granted credit to Yang's Chinese firm, Huishan Dairy, and are unlikely to accept a merger of domestic assets with overseas businesses.