According to a report from the Wall Street Journal,"Suntech Power Holdings Co. mired in more than $2.3 billion in debt, would pay back about 30% of what it owes to Chinese creditors in a deal that would also keep its solar-equipment factories humming under new management".
"The move to keep the former operations off counter to Beijing's efforts to rein in industrial overcapacity and is a China's onetime solar-power champion operating runautionary tale for overseas investors eager to gain exposure to China's booming economy. U.S. creditors are owed more than $500 million in Suntech convertible bonds but it wasn't clear whether they would recoup their investment".
Shunfeng Photovoltaic International,a smaller rival of Suntech, said Sunday that a court in Suntech's hometown of Wuxi approved Shunfeng's purchase of Suntech's main assets in China. A Shunfeng spokeswoman said the company wasn't available for comment.
Under the deal, Shunfeng will take over the subsidiary, Wuxi Suntech Power Co., in exchange for repaying a portion of Suntech's Chinese debt. Although Chinese creditors are owed more than $1.75 billion, they voted last week in favor of the deal, which allows them to recover about 30% of their claims, Shunfeng said.
Shunfeng said it would pay three billion yuan ($492 million) to Suntech, with the proceeds earmarked for Chinese creditors. Shunfeng said it would kick in an additional 10 million yuan for losses incurred by Wuxi Suntech before it was pushed into Chinese bankruptcy. The Wuxi government agreed to be responsible for any claims or losses exceeding that amount, Shunfeng said.
Shunfeng also pledged to invest an additional three billion yuan in Wuxi Suntech within two years, some of which will go toward upgrading its factories. Shunfeng said it agreed to pay all of Wuxi Suntech's back taxes.
The deal would ensure that Wuxi Suntech's three factories, which produce solar cells and solar panels, will keep operating, Shunfeng said. Solar cells are a key component in solar panels.
A factory that makes solar cells had been closed because it was considered obsolete, Shunfeng said. A second factory, which produced solar cells with a capacity 1.6 gigawatts a year, has been idle since August of last year. A third factory, which can produce 2.4 gigawatts a year of solar panels, has been operating at about 60% capacity since November 2012.
At its peak, Suntech employed more than 17,000 people and could produce as much as 2.4 gigawatts a year of solar cells and solar panels. Today, the company has about 5,600 employees, according to court documents.
Shunfeng said that its largest shareholder, Cheng Kin Ming, will pay for the deal so that the company won't be held responsible for payment if it decided to back out. Shunfeng will reimburse Mr. Cheng if the deal closes.
Mr. Cheng, who is based in Hong Kong and also known as Zheng Jianming, purchased 30% of Shunfeng's shares last year and since has cobbled together a vertically integrated solar-power supply chain from the remnants of what once were China's largest solar manufacturers. Mr. Cheng this year acquired more than a fifth of LDK Solar,once the world's largest manufacturer of solar wafers, a key component of solar panels.
Local governments have promoted "blind investment," which has led to severe overcapacity in sectors such as solar energy, said the official, Yang Weimin, deputy director at the Office of the Central Leading Group for Financial and Economic Affairs. Mr. Yang said the "core problem" with China's economy is "excessive allocation of resources" and "unreasonable intervention" by local governments.
Suntech's deal with Shunfeng still could be delayed by a court in the Cayman Islands, where Suntech is incorporated. Suntech recently filed for liquidation in the Cayman Islands to avoid being pushed by U.S. creditors into involuntary bankruptcy in the U.S.
Shunfeng said Friday that it received a letter from Suntech's court-appointed liquidators saying that Suntech isn't allowed to sell its Chinese assets. Shunfeng said the objection should be raised with the Wuxi court and that it would discuss the matter with Suntech's Chinese court-appointed administrator.
