China Solar Panel Maker Starts Bankruptcy Proceedings

China Solar Panel Maker Starts Bankruptcy Proceedings

Suntech Power Holdings Co. (STP), once the world's largest supplier of solar panels, is involved in bankruptcy court proceedings in the eastern Chinese city of Wuxi, the company said Wednesday.

Suntech said in a news release that a group of eight Chinese banks filed a petition for insolvency and restructuring of its main operating subsidiary in China in the Wuxi Municipal Intermediate People's Court in Jiangsu province.

Wuxi Suntech told the court it woudln't file an objection to the petition, Suntech said, adding that the court will decide whether to accept the petition in the next few days. If the petition is approved, Suntech will continue to produce solar products to meet customer orders, Suntech added.

The banks are owed as much as 7.1 billion yuan (US$1.14 billion) and include Industrial & Commercial Bank of China, Agricultural Bank of China and Bank of China, the official Xinhua news agency reported earlier.

Suntech, which is listed on the New York Stock Exchange, defaulted on a $541 million bond payment on Friday. The default on the convertible notes triggered cross-defaults under Suntech's other outstanding debt, including loans from International Finance Corp. and Chinese lenders, Suntech said earlier this week.

Suntech, whose publicly traded entity is incorporated in the Cayman Islands, said Monday that it was "unaware of any legal proceedings initiated by any note holders against the company."

Suntech, based in Wuxi, is still one of the world's largest solar-panel manufacturers, but it has been struggling under debt of more than $2 billion. Profit has declined because of a world-wide oversupply of solar panels, a drop in prices and anti-dumping tariffs imposed on China by the U.S. government.

If Suntech seeks bankruptcy protection in the U.S., or if its U.S. creditors successfully filed for an involuntary bankruptcy, it would be the largest and highest-profile Chinese company listed in the West to do so in recent years.

Sino-Forest Corp., a timber company listed on the Toronto Stock Exchange, filed for bankruptcy last year amid allegations by a short seller and Canadian regulators that it exaggerated the value of its assets. Sino-Forest executives have disputed the fraud allegations. Nasdaq-listed medical-device maker China Medical Technologies sought Chapter 15 foreign-firm bankruptcy protection in New York in August.

Suntech, once a flagship for China's renewable energy industry, has been trying to find a white knight to take over and inject fresh capital into the company. On Tuesday, it appointed two new board members, one of whom is a former executive at Wuxi Goulian Development Corp., a state-backed investment firm.

Earlier this month, Suntech's founder Zhengrong Shi said he was improperly removed as chairman and that he was committed to staying. Suntech named Susan Wang as successor to Mr. Shi and said he would remain chief strategy officer and a director.

China has continued to support its solar industries, even as U.S. and European solar-equipment manufacturers have been forced into restructuring or bankruptcy. However, China's State Council, or cabinet, in December signaled it would stop funding money-losing domestic solar-panel makers, which are caught up in a global downturn for the industry, and instead encourage mergers among its major companies. It also indicated it would ban local governments from supporting them and allow the market to determine winners and losers.

The industry's debt grew rapidly between 2009 and 2011 to fund expansion of manufacturing capacity. Although global solar-power demand has grown each year, it hasn't kept pace with the manufacturing boom, causing solar-panel makers to cut costs and write down investments while they hunt for new markets. European demand in particular has been hit by the Europena Union's economic crisis and the rolling back of clean-energy subsidies.

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