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.The filing has triggered volatility that has rippled across China's renewable energy sector in the days following Sun Tech Holdings initiating bankruptcy protection. Shares of Sun Tech [NYSE- STP] closed down 28.81% since the March 20th filing while shares in Yingli Green Energy [NYSE- YGE] declined 13.89% since Wednseday and LDK Solar [NYSE- LDK] was down 6.87% since Tuesday.
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.
According to industry observers, Sun Tech's path to bankruptcy in China was paved with numerous warnings and red flags. In June of last year, a representative at the Luxembourg-based, Sun Tech-controlled Global Solar Fund was accused of fradulently obtaining a guaranteed $680 million loan by pledging nonexistent German bonds as collateral. The following month, prosecutors in Italy filed criminal charges against the Global Solar Fund for illegally building solar farms in Italy to milk that country's generous renewable energy subsidies.
A prosecutor in the southern Italian city of Brindisi has formally charged five of the fund's subsidiaries with illegal construction of solar power plants, accusing them of sidestepping the approval process in order to exploit Italy's generous renewable-energy subsidies.Sun Tech hastily reached a settlement with the Luxembourg-based GSF earlier this month in the hopes of raising enough cash for the $541 million bond payment they eventually defaulted on.
The charges are that GSF subsidiaries failed to obtain the correct permit to build solar plants of more than 1 MW by splitting each park up into several smaller units that qualified for a less rigorous and faster permitting process.
In some cases, the GSF subsidiaries prematurely announced completion of construction on the plants in order to meet a deadline needed to qualify for incentives, court documents show.
The trial involving these five solar plants is set to begin on December 6.
Another 11 of the companies controlled by the fund are under investigation, and charges will be sought against them, said Nicolangelo Ghizzardi, the prosecutor handling the cases.