SHIJIAZHUANG, Feb. 12 (Xinhua) -- A Chinese court Thursday declared dairy giant Sanlu Group, the company at the heart of the melamine contamination scandal, bankrupt.

The Intermediate People's Court of Shijiazhuang, capital of northern Hebei Province, issued the bankruptcy order at the first meeting of Sanlu's creditors.

Sanlu Group had failed to repay outstanding debts, which surpassed its assets. It met the conditions for bankruptcy, according to the court order.

Sanlu Group has 274 creditors, the largest being Sanlu Business and Trade Company, a wholly-owned subsidiary of the group itself. The other creditors include banks, distributors and suppliers.

On Dec. 19, the group borrowed 902 million yuan (132 million U.S. dollars) to pay the medical fees of children sickened by its tainted baby formula and to compensate the victims, which increased its debt to 1.1 billion yuan.

Beijing Sanyuan Foods Co. Ltd., a potential buyer of Sanlu assets, said Thursday it did not know the details of Sanlu's bankruptcy but was watching developments closely.

"When the auction notice for Sanlu is published, our board of directors will meet to decide whether to bid and discuss related details," Wang Qian, secretary of the board of Sanyuan, told Xinhua.

Sanlu leased its plants to a subsidiary of Beijing Sanyuan Foods Co. Ltd. in December, days after the bankruptcy petition was accepted by the Shijiazhuang Intermediate People's Court.

Sanlu stopped production on Sept. 12. Its melamine-tainted baby milk powder was found to have caused the deaths of at least six children and kidney problems in thousands of others.

Last month, it was fined 49.37 million yuan by the Shijiazhuang court, which also imposed a life sentence on Sanlu chairwoman Tian Wenhua.

Sanlu staff were sad to hear the bankruptcy news, but said they knew it was just a matter of time.

"I almost cry whenever I think of it," said a retiree surnamed Chen. "I worked for more than 30 years for Sanlu" and its predecessor.

An accountant who declined to be identified said most of the Sanlu staff were on furlough at a wage of 600 yuan a month. The accountant used to earn more than 2,000 yuan per month.

Most middle-aged and younger staff were wary Thursday when to comment, worried that a slip of the tongue would affect their employment.

"I hope I can be employed by Sanyuan, if it buys Sanlu," said one young man who declined to be identified.
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