Sanlu declared bankrupt by local court

Sanlu, the dairy company most closely tied to the tainted milk scandal, has been declared bankrupt by a court in its home city of Shijiazhuang in Hebei province, Bloomberg reported. According to a statement from Fonterra, the New Zealand dairy group that is a joint venture partner of Sanlu, a receiver will take over management of the company and has six months to dispose of the assets and pay creditors. Fonterra has already written off its US$113 million investment in the joint venture. Fonterra CEO Andrew Ferrier said the company was aware of Sanlu’s mounting debt problems and so the bankruptcy didn’t come as a surprise. The revelation that baby formula produced by a number of Chinese dairy firms contained excessive amounts of the industrial chemical melamine has hurt the US$20 billion domestic dairy industry. China Mengniu on Wednesday said it expects to post a US$131 million loss in 2008 due to poor sales.