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The local court says that as the bankruptcy curator has rescinded the aircraft and engine lease agreement between East Star and GE Commercial Aviation Services (GECAS), an aircraft fleet and financing solutions provider, and the foreign party has begun recapturing leased airplanes and engines. So, East Star is unlikely to resume normal operation. Besides, when GECAS applies for a liquidation of East Star as a creditor, there is no legal basis available for the CNAF subsidiary to submit another application for a restructuring of the same company. The CNAF subsidiary raises an objection, saying that additional cash will be injected into East Star after it launches a restructuring, which enables the company to rent aircrafts from other suppliers. China's bankruptcy law grants debtors and certain promoters the right to apply for a restructuring before the court declares a bankruptcy. Literally, creditors are not allowed to file another restructuring application after they apply for a liquidation of debtors. The law has not clarified how to resolve such conflicts between creditors. Wang Xinxin, professor at Law School of Renmin University of China, and member of the bankruptcy law drafter, points out that the law protects the property of debtors, and aims to bring the bankrupted companies back to life. However, it has no clear regulations or restrictions for the right of creditors. Yin Zhengyou, senior partner of Weiheng Law Firm, says that the bankruptcy law lays emphasis on the right of debtors, particularly, promoters to apply for a restructuring, but that does not deprive other creditors except liquidation applicants of the same right. Once East Star goes through liquidation, its intangible assets like market share and brand influence will disappear, and the Civil Aviation Administration of China (CAAC) will take back its routes and timetables. So, it would be better for the CNAF subsidiary if East Star kicks off a restructuring. On June 18, 2009, Wuhan East Star International Travel Services Co., Ltd., the third largest shareholder of East Star, entrusted Grandall Legal Group to hold a proseminar attended by lawyers, who discussed the possibility for the private airway to launch a restructuring. Wu Yue, partner of the law office, disclosed that several potential investors from Shanghai were interested in East Star. They were engaged in aviation service and have rich capital flows. A local report reveals that Air China Limited (SHSE: 601111 and SEHK: 0753), one of China's top three airways, will take over East Star's route resources in Wuhan, the latter's base camp. (USD 1 = CNY 6.84) Source: www.cnstock.com (June 22, 2009) For full details for CNLVF click here.
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