In such cases, the state-owned enterprises must first pay their historical debts and entitlements to employees. According to government policy, an enterprise may sell its land rights to raise money to make payment even if the land rights have been used as collateral for other loans. If this is not enough, the enterprise can begin disposing of its assets to satisfy its obligations.
In this case, the enterprise must first dispose of assets not used as collateral. After these assets have been sold, the enterprise then may sell assets used to secure loans. Accordingly, in these cases banks recoup on average less than 1.2 percent of their loans, many times lower then they expected.