* Shares of Shunfeng suspended pending an announcement
* Shungeng to put 2-3 billion yuan into Wuxi Suntech
* Creditors to vote on deal mid-November - sources
By Charlie Zhu
HONG KONG, Oct 25 China's Shunfeng Photovoltaic
International Ltd has signed a preliminary deal to buy
the main China unit of Suntech Power, two sources close
to the matter said on Friday.
The framework agreement with Wuxi Suntech's administrator
brings the closely watched restructuring of the firm's $1.75
billion debt closer to completion after Suntech Power defaulted
on a $541 million dollar convertible bond in March.
Crushed by a global glut of solar panels following the
global debt crisis, Wuxi Suntech filed for bankruptcy protection
five days after its parent company's default - one of the
biggest by a Chinese company.
Creditors of Wuxi Suntech will vote on the restructuring
proposal at a meeting around mid-November, the sources told
Reuters. They requested anonymity as they were not authorised to
discuss the matter with media.
"A framework agreement has been signed. But it remains
uncertain whether it will be approved by creditors who will meet
around mid-November for this," one source said.
Shares of Shunfeng were suspended from trading on Friday
pending an announcement related to a proposed acquisition by the
company, Shunfeng said in a filing with the Hong Kong bourse.
Under the framework deal signed in Wuxi on Thursday,
Shunfeng is expected to pump around 3 billion yuan ($493.26
million) into Wuxi Suntech as initial investment, and another
2-3 billion yuan to sustain its operation, one of the sources
The second source declined to comment on the financial terms
of the restructuring, but said the floor price set by the debt
administrator for the auction of Wuxi Suntech was 2.5 billion
Spokespeople for Shungfeng and Wuxi Suntech could not
immediately be reached for comment.
Analysts say creditors for Suntech's domestic debt are
likely to recover only a fraction of their capital. What happens
to them will have wide implications for investors who have
flocked to Chinese dollar-denominated debt in search of yield.
At the end of March 2012, New York-listed Suntech Power had
total debt of $2.2 billion, including the convertible bond,
loans from China Development Bank, and a $50 million convertible
loan from International Finance Corp, the private sector arm of
the World Bank. The listed firm has yet to publish its 2012
annual report and disclose its overall debt situation.
The Wuxi Suntech case will also be a rare test of a
bankruptcy law introduced in 2007. Local government officials
generally mediate between creditors behind closed doors and
Beijing has used the law cautiously, fearing the failure of
large firms and widespread layoffs could lead to social unrest.
China's recent moves to prop up the ailing domestic solar
industry has prevented a further deterioration in the sector and
even sparked fresh interest from companies like Shunfeng. China
announced in July that it aims to more than quadruple solar
power generating capacity to 35 gigawatts by 2015 among many
other incentives to support the industry.