Wuxi court declares Suntech bankrupt

Solar panel giant to 'reorganize'after it defaults on bond repayment

Suntech, one of the world's biggest solar panel manufacturers, was declared bankrupt on Wednesday, ringing alarm bells in the nation's solar industry.

Xinhua News Agency reported on Wednesday that a court in Wuxi, Suntech Power Holdings Co's base, had ruled that the company undergo "bankruptcy reorganization".

The announcement came two days after Suntech said it had defaulted on a $541 million bond payment.

The company has been badly hit by oversupply in the global market for solar cells and panels, as well as by trade disputes with the United States and Europe over alleged Chinese dumping and government subsidies to producers.

The board of the company ousted its founder, Shi Zheng-rong as chairman earlier this month.

The 21st Century Business Herald on Wednesday quoted sources as saying Shi had the support of the Wuxi government and could return to Suntech as part of the reorganization.

By the end of February, nine major Chinese commercial banks had lent Suntech a total of 7.1 billion yuan ($1.14 billion), Xinhua reported.

Shi founded Suntech in 2002 and took the company public three years later, becoming the world's first solar billionaire.

He obtained credit from China Development Bank Corp that helped him wrest control of the industry from German and Japanese competitors.

But a sharp drop in solar panel prices in recent years has wiped out the profits of solar panel makers around the world.

Suntech was also hurt by a report in July that a business partner faked $680 million in collateral for a loan Suntech had guaranteed.

The Wuxi government has poured a huge amount of subsidies into Suntech. To get government subsidies, the company sold its products to its overseas subsidiaries to boost its sales figures, according to Chinese media reports.

"Suntech's fall would seriously hit China's solar industry, which has experienced a great deal of turbulence since late 2009," said Cheng Peng, a partner with Adfaith Management Consulting.

"Suntech's failure may also hurt other high-tech companies listed overseas, or those seeking IPOs overseas," Cheng said.

Orders for Chinese PV equipment slumped 80 percent year-on-year in 2012, the China PV Industry Alliance said in its latest report.

It said up to 90 percent of Chinese polysilicon makers had halted production, and 80 percent of solar panel producers had shut down or sharply reduced output.

Gao Hongling, deputy secretary-general of the China Photovoltaic Industry Alliance, said Suntech's fall would serve as a warning to other emerging strategic industries in China which also face similar problems of haphazard investment and excessive production capacity.

As for domestic demand for photovoltaic solar panels, she said that the government's target to create a 10-gigawatt market this year will help the industry to some extent.