Chinese banks force Suntech into bankruptcy

March 20, 2013
Obsession
Energy Shocks
March 20, 2013

Solar panel maker Suntech said today that eight Chinese banks had filed a petition with a local court to declare the company’s Chinese operations bankrupt. Once the world’s biggest solar module manufacturer, Suntech’s Chinese subsidiary, Wuxi Suntech Power Holdings, owes $1.4 billion to Chinese banks, according to a presentation made to bondholders last November. This morning, Suntech had a market cap of $106 million.

The Suntech saga is being watched closely as a bellwether for the global solar industry. Fueled by cheap government loans, Suntech, Yingli, Trina and other photovoltaic panel manufacturers ramped up production in recent years, sending panel prices plummeting 75% and capturing a large share of the worldwide market. China is now home to about 80% of global solar module manufacturing capacity. The Chinese solar expansion set off a boom in Europe and the US as installers took advantage of cheap solar panels to expand their business. The collapse of Suntech and other Chinese manufacturers could leave installers like SolarCity on the hook for hundreds of millions in warranties. Having helped build a global solar industry in less than a decade, the question now is whether the Chinese government will engineer its contraction to shrink capacity and allow the surviving companies to thrive.

“The insolvency and restructuring procedure is designed to facilitate an orderly restructuring plan for both Wuxi Suntech and its creditors,” Suntech said in a statement. “In such proceedings, the Chinese court would typically appoint administrators to Wuxi Suntech to administer the restructuring, including negotiations with existing bank lenders and other creditors. Wuxi Suntech will apply to the Court to continue operations under the supervision of the administrators.”

On March 15, Suntech defaulted on $541 million in convertible notes but since the parent company is registered in the Cayman Islands it’s unlikely those bondholders will get paid. The Cayman Islands-registered entity is also on the hook for a €493 million ($638 million) credit line from the government-run China Development Bank, stemming from a scandal over a European joint venture.

And in what may be a prelude to a government takeover of Suntech, the company yesterday appointed an executive from a state-owned conglomerate, Weiping Zhou, as its new president. The board earlier this month removed founder Zhengrong Shi as executive chairman.

More background

Day of reckoning comes for China’s solar industry—and it could take the US and Europe solar renaissance with it

Recent updates

March 19—China’s Suntech may be headed for a takeover by the state

March 18—Why Suntech’s aggrieved bondholders have little chance of getting their money back

March 12—Collateral damage from solar trade war as Chinese company shuts US factory

March 11—Chinese solar giant cuts deal with bondholders and avoids bankruptcy—for now

March 7—Another strange twist for a major Chinese solar panel maker facing possible bankruptcy

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