The first week of January, 2009, was proving to be a challenge for Nine Dragon’s Paper. The company had
to repeatedly deny rumors that it was on the edge of bankruptcy. A variety of media reports over the past two
weeks had reported that the company’s inability to service its debt would lead to a bankruptcy filing.Incorporated in Hong Kong in 1995, Nine Dragons Paper (Holdings) Limited, had become an international
powerhouse in the paper industry. The company's primary product was linerboard, with a product line
including kraftlinerboard, testlinerboard and white top linerboard in a portfolio of paperboard products used
to manufacture consumer product packaging. The company had expanded rapidly and spent extensively.
But by January 2009 the world economy was spiraling downward. Squeezed by market conditions and
burdened by debt, Nine Dragons Paper (NDP), the largest paperboard manufacturer in Asia and second largest
in the world, saw its share price drop to HK$ 2.33, 90% off its high and less than half of book value. As the
economic crisis of 2008 bled into 2009, export-oriented industries suffered. Rumors had been buzzing since
October that NDP was on the ropes. It was carrying so much debt that more than one analyst was asking "Will
they go bust?" Was the financial crisis of 2008 about to claim another victim, or had friction between the
global economic crisis and the company's debt ignited jittery nerves in the global markets?