Taizinai's holding company in liquidation

Taizinai, a Chinese manufacturer of dairy products, is unable to pay its debts and will be liquidated.

The company's lenders include Royal Bank of Scotland and Citibank, with Goldman Sachs and Morgan Stanley among its investors.

Goldman and Morgan were part of a group, along with the private equity firm Actis Capital, which took a 31% stake in Taizinai for US$73 million in early 2007, a time when the dairy firm, based in Hunan, planned to go public. The initial public offering never materialised.

The Chinese dairy industry was swept by a scandal over tainted milk in 2008 that dented dairy makers' reputations and led to greater government scrutiny of the industry. While Taizinai was not directly involved in the fiasco, the Hunan government took control of its dairy operations in December 2008, but has been unable to save the maker of yogurt drinks from a wider industry downturn.

According to a media report, Taizinai had collapsed and the company had debts of RMB3 billion (US$439 million).

While Taizinai's holding company is in liquidation because it is unable to pay its debts, its subsidiary in China is still operating, sources familiar with the matter said.

The Cayman documents named Borelli Walsh, an accounting firm based in Hong Kong that specialises in bankruptcies, as the company tapped to handle Taizinai's accounts, and said Citigroup was one of the major lenders to the dairy maker. The accounting firm declined to comment, as did Citibank.

Taizinai's financing from R.B.S. and Citibank came from a bank syndicate, which also included the Singapore bank DBS and two local banks.