3 Min Read
HONG KONG, April 4 (Reuters) - A creditor sought bankruptcy restructuring for Chaori Solar, the firm that caused ripples in world markets last month with China's first domestic bond default, and the company said on Friday it had not yet agreed any deal to stay solvent.
Metals and materials company Shanghai Yihua applied to Shanghai's intermediate court to put the solar equipment company into bankruptcy restructuring, Chaori said in a filing to the Shenzhen stock exchange.
"The creditor filed the application because of Chaori Solar's inability to pay the debts due and to stay solvent," Chaori said in the filing, adding that it was uncertain whether the court would accept the application.
Chairman Ni Kailu of the company, the full name of which is Shanghai Chaori Solar Energy Science and Technology Co Ltd, has been in talks with several parties to seek funds to help it stay afloat. But it said in a separate announcement that the chairman's efforts have been fruitless so far.
"Due to the company's huge debt, stakes that are being frozen, and the deteriorating business operations, Chairman Ni Kailu has been unable to reach any agreement yet," the statement said.
Chaori Solar recorded a default on March 7, when it missed an interest payment on a bond. It warned that it would only pay out less than five percent of the 89 million yuan ($14.5 million) in interest due on 1 billion yuan worth of bonds issued in 2012.
The default highlighted credit risk in China, which has seen a massive run-up in corporate debt since 2008, and aroused widespread interest across financial markets.
But it was also seen as benefiting the economy in the long run by heralding the end of an era of risk-free credit in China.
China's solar industry has suffered from severe overcapacity and falling prices for photovoltaic cells.
Shares of Chaori Solar, which had been suspended since Feb. 19, will resume trading on April 8 when China's market reopens from its Tomb Sweeping holiday.
Under China's securities law, Chaori could be delisted from the Shenzhen stock exchange after posting a preliminary loss for a third year in a row.
The company, which had 6.5 billion yuan in outstanding liabilities at end-September, reported a 2013 preliminary net loss of 1.33 billion yuan ($216.67 million), it said in March.
The company's Chaori-11 bond also faces delisting risks. (Reporting by Meg Shen in Hong Kong and Lee Chyen Yee in Singapore; Editing by Anthony Barker)