By Charlie Zhu
HONG KONG, Nov 12 (Reuters) - Creditors of the main unit of Chinese solar panel maker Suntech Power Holdings Co Ltd on Tuesday approved a plan to restructure its $1.75 billion debts with proceeds from acquirer Hong Kong-listed Shunfeng Photovoltaic International Ltd.
Shunfeng announced this month it had agreed to take over indebted Wuxi Suntech Power Co Ltd for 3 billion yuan ($493 million), pending approvals from various parties including its own shareholders and Wuxi Suntech's creditors on the debt restructuring.
Shunfeng has said it would use the proceeds to pay down Wuxi Suntech's debts.
Creditors, including representatives from Chinese banks as well as domestic and foreign suppliers, backed the debt restructuring plan, Suntech spokesman Ryan Ulrich said.
Ulrich declined further comment.
A source who attended Tuesday's meeting in the eastern city of Wuxi said the more than 500 creditors had "overwhelmingly" approved the plan.
"It means Shunfeng has cleared a major hurdle for its acquisition," said the source, who asked not to be identified, adding that the restructuring required final approval from a local court in Wuxi.
Shunfeng said it could not provide immediate comment.
Crushed by a global glut of solar panels following the global debt crisis, Wuxi Suntech filed for bankruptcy protection in March, immediately after its parent defaulted on a $541 million offshore convertible bond - one of the biggest by a Chinese company.
A completion of Wuxi Suntech's debt restructuring would pave the way for a revamping of Suntech Power Holdings.
Wuxi Guolian Development Co Ltd, the investment arm of the Wuxi city government, has indicated interest in injecting $150 million in the form of equity investment and some unspecified solar and other assets in Suntech Power Holdings. It also called for a swap of unspecified amounts of Suntech Power Holdings' debts - which totalled $2.4 billion - into equity.
The proposed bailout would prevent the former major Chinese solar panel maker from going bankrupt, but it would also almost wipe out the equity stakes held by its existing shareholders.
A takeover by Guolian would dilute their stakes to single digit, two people with knowledge of the proposal told Reuters. "It would be diluted to close to nothing," said the source, who spoke on condition of anonymity.
Suntech, a former green tech poster child, now has a market capitalisation of around $100 million, down from over $10 billion at its peak. The New York bourse delisted the shares this week, citing uncertainty over its ability to file its 2012 annual report within the time it requires.
Offshore creditors of Suntech Power Holdings can push for bankruptcy proceedings, but they would end up recovering little from the process given most of its assets are in mainland China and onshore lenders rank ahead of them in claims, analysts say.